Both high-tech firms and traditional organizations reap the rewards of implementations
For the rest of the June 2002 issue of CRM magazine please click here
The basic tenants of doing business are pretty much the same regardless of whether you are an agricultural business in Des Moines or a semiconductor maker in San Jose. But when it comes to implementing a complex solution like CRM, do companies that make a profit creating and selling technology have a leg up on old-line, traditional companies? Are Cisco Systems Inc., Hewlett-Packard Co., and IBM Corp. more likely than Dole Food Company, Deere & Co., or ABF Freight System Inc. to put in place a CRM system that succeeds?
Industry watchers have a variety of opinions about the differences between how high-tech and nontech companies approach, implement, and deploy CRM solutions, but most claim that there are too many factors that go into the mix to determine whose approach is best.
"It's not about high-tech versus low-tech," Barton Goldenberg, founder and president of ISM Inc., a CRM research and consulting firm in Bethesda, Md., says. "It's about company size, organizational structure, resources, money spent, technical savvy, prior CRM experience, e-customer readiness, implementation partners, business distribution models--and each company's willingness to change processes."
Still, some analysts say there are very broad conclusions that can be drawn.
"There is a perverse relationship between high-tech companies and their use of technology. They have a tendency to use IT as a panacea," says Christopher Dallas-Feeney, vice president of New York-based management consultancy Booz Allen Hamilton.
That high regard for technology can be beneficial. Tech companies may be a little too enamored with technology, but the upside is that they actually put a more critical eye on evaluating it, says Mitch Kramer, an analyst for the Patricia Seybold Group, a market research firm in Boston. "I think people with experience in tech are more skeptical and cynical, and tend to peel it back and see exactly how things work more than those who lack the experience," he says.
Because of that lack of tech experience nontech companies are more likely to use consultants in the CRM process, some analysts say. "It's highly likely that high-tech firms know what skills they have in-house, therefore they are probably less likely to use a consultant," Kramer says.
Even so, tech companies should not be overconfident. High-tech companies may have less of a learning curve in getting up to speed with technology, but that could lead to costly assumptions, warns Jill Dyche, president of Baseline Consulting Group and the author of The CRM Handbook.
As an example, Dyche recalls a CRM implementation at a networking services provider. "They all thought they understood CRM, but they all had different definitions of CRM," she says. "They were chomping at the bit and ended up deploying it too quickly. The solution didn't meet everyone's definition and they needed to rethink it."
Goldenberg says he has also worked with high-tech firms at which more than half of the workers failed online computer-literacy tests. "It's not a given that computer users are the best users of technology," he says.
But one advantage high-tech companies do have, according to Goldenberg, is negotiating deals for software and solutions. "High-tech companies get a lower price, because they know the margins," he says.
Technology may not be the only factor in the ease of CRM implementations. It is not whether the business is high- or low-tech, but the size of the company that is among the key factors for determining similarities and differences among CRM projects, Seybold's Kramer says. "At a company like HP, individual managers may have the power and the budget to implement a CRM project, since the decision-making process often exists at a lower level," Kramer says. "But a smaller company might require the sign-off of a top-level officer to get the green light."
Although there are myriad opinions on what differences exist between high-tech and nontech company CRM implementations, nearly everyone agrees that setting objectives should be a priority for both. "There should not be a difference between either," Kramer says. "Both should pick the functions and the set the objective before the technology."
Joe Outlaw, an analyst with market researcher Gartner Inc., agrees. "Regardless of what market companies are in, they have to think about CRM before bringing in the technology," Outlaw says. "If you don't have a map of where you are going then you are probably not going to get there."
Two companies that followed the path to a successful CRM implementation are IBM, the grandfather of all high-tech firms, and ABF Freight System, a 77-year-old trucking company. While there are both differences and similarities in how each company approached its CRM strategy, their experiences illustrate that it takes more than technology to make CRM implementation a success.
ABF: Industry Pacesetters
Just because a company's revenue is not derived from the sale of technology does not mean it is not tech savvy.
Take ABF Freight System. At first blush the freight and trucking company, established in 1925, does not appear as a likely adopter of cutting-edge technology. Based in Fort Smith, Ala., the average tenure of the firm's executives is 31 years and the company does not even have voicemail.
But ABF has not only embraced technology to improve its business, it has won awards for its CRM implementation, its Web site, and its B-to-B e-commerce initiatives. Most important, the company's CRM solution has won rave reviews from its customers, says Bob Davidson, vice president of marketing and pricing for ABF.
In a single day the freight company moves approximately 22,000 shipments weighing more than 27 million pounds, and travels nearly 1.12 million miles. To handle that volume of business the company has nine distribution centers, 309 revenue-producing customer service centers, and 700 sales representatives across the United States.
ABF was looking to reduce its transaction costs and to allow its more than 80,000 customers more direct access to a variety of shipping information. So in 1995 it began to implement CRM, which has been an ongoing process. Davidson estimates that ABF has spent between $2 million to $2.5 million on its CRM effort, but notes that that figure might not be completely accurate. "It's like asking someone how much money they've spent to feed their kids for their whole lives," he says. "You can't calculate that figure."
Today, ABF customers can get price quotes, assess pick up costs, reroute shipments, dispute charges on bills, and track shipments through its Web site. For ABF workers the site offers logistics and planning tools, charts and graphs for shipping, a customer information database, and supply chain management tools.
"Our customers are buying a service, and we have found that information is the most important component of that service," says Davidson, who claims that ABF has excellent internal management systems and process controls and that extending those to its customers seemed natural. "The beauty of this is that we didn't rewrite our systems," he says. "We just gave customers access to the systems we had. Sometimes legacy systems are part of the problem and sometimes they are part of the solution. It really depends upon what the interface is to the users."
As an example, Davidson cites a method within the system that allows customers to reroute a shipment. It is called dynamic rerouting. Users have no idea that they are directly accessing a legacy mainframe system to modify the destination of their shipment. "That is something that took us a week to write, but would have taken five years to write if we started from scratch," he says.
And the company did it on their own using Datatronics, a separate IT group owned by ABF that does technology implementations only for the company.
"We never bring in consultants," Davidson says. "Otherwise we would spend three years teaching them our business before we even got to implementing new software."
ABF executives say all of its online efforts have been well-received: More than 80 percent of its business is now handled via the Web site.
Although the company declined to provide specific figures, it claims a reduction in the administrative and transactional costs at the macro level. It also claims to now be the most profitable company in its market segment.
"We held an Internet night in Omaha. We brought in customers and showed them what they can do using our site. The very next day transaction calls to our Omaha service center fell by two thirds," Davidson says. "Even if we've saved nothing, we think it's a good thing. We have made ourselves indispensable to our customers and think that makes a difference. This is not a commodity market and the extra layer of information we give our customers is invaluable to them and to our business."
"Our philosophy has not been to force these processes into the channel," Davidson adds. "We also let people call and handle business over the phone. But we try and make the process of self-service so compelling and easy that naturally our customers want to take this route."
Another change is that ABF salespeople are no longer spending most of their time in transactional roles, but instead have assumed more of a consulting role to help customers solve logistical problems. For example, using a rate-review function customers can change, review, or dispute their bill. Before the CRM system that process was handled over the phone and could take weeks to resolve with the help of four or five ABF people handling the issue. Now users can do it on the Web and have an answer in 20 minutes. "We used to use a telephone voice system, but with the advent of the Internet, it was a new way to establish direct communication with the customer," Davidson says.
Since embracing the Web, the company has thrown out all voicemail. "Voicemail is an abuse of technology," Davidson says. "The most important thing is to have a real customer talking to us and to place an obstacle between us and customer is sacrilegious in our thinking."
He stresses that ABF is squarely focused on leveraging technology for the benefit of its customers.
"It is our inclination to embrace technology, but for the practical side, not just for the sake of technology. For us, CRM is more of a process rather than a project. If you asked most people in the company about our CRM initiative they would have no idea what you're talking about. For us, it's not a project but a customer-focused way of doing business that is the backbone of our business. If that's low tech, then we're low tech and we love it."
IBM: Early to the Party?
Considering ABF's success, it seems that a company does not have to sell technology to be expert at using it as a competitive advantage. Even computing giant IBM admits that its advantage over nontech companies is minimal. "The biggest advantage we have is that if a technical problem occurs, I can get the best brains in the world on it right away," Cher de Rossiter, project executive for CRM at IBM, says. "But the technical side is only 30 percent of the project. It isn't that hard. It doesn't matter if you're IBM or a trucking company, you have to have executive-level support for the project. IBM is doing CRM on a grand scale, but CRM doesn't fail because of the technical stuff, it will fail if you don't have the willingness to stick to the road you are taking."
IBM does have that stick-to-it-iveness. In fact, for IBM's senior management team CRM is the company's most important project. So vital, de Rossiter says, that CRM is not really a specific project at Big Blue, but rather a mind-set and a new way of interacting with its customers that permeates all aspects of the computer giant's $86 billion business.
IBM boasts the largest customer relationship management program in history. There are currently about 9,000 sales and marketing staffers using the sales and marketing portion of Siebel Systems Inc.'s CRM offering, which IBM launched in January 2000. The plan is to expand that to a total of 75,000 employees, including 35,000 sales representatives and 40,000 service and support workers, by early next year, according to de Rossiter. Overall about 160,000 IBM workers are using some of the CRM solution's various components, de Rossiter estimates. IBM's long-term goal is to have the system incorporate all the company's lines of business, enabling hundreds of thousands of employees, business partners, and customers to share information across 164 countries.
IBM executives would not disclose how much the company has spent on CRM. De Rossiter claims there really is no accurate way to calculate that amount since "there are costs associated with change control and modifications to structures in the business that might be misleading."
Regardless, the company is pleased with the outcome thus far. Executives say 11 percent of the company's overall revenue--or a little more than $8.6 billion--comes from sales at IBM.com. De Rossiter calls that figure just "moderate productivity gains" and expects it to grow as more of IBM's field sales force gets access to CRM tools later this year.
There has also been an increase in productivity at all of IBM's 26 worldwide call centers. The increases vary from 1 percent to 7 percent, depending on location, she says.
IBM has been both criticized and lauded for its CRM efforts. Some industry watchers claim the company, which began deploying enterprise CRM on January 2000, was late to the CRM party. Other analysts says IBM started thinking about CRM in the early 1990s and considering the size and scope of the company, say it has done pretty well.
De Rossiter admits that it's a little both.
"Were we early? Yes. Were we late? Yes. We were both," she says. "We were early looking into CRM, but didn't really deploy it at the enterprise level until 2000."
IBM's CRM foray began in 1993, before Siebel or enterprise CRM products were available, she says. IBM looked into CRM and decided that a best-of-breed solution was in order. Then company officials decided that it was first necessary to take a closer look at the process and more clearly define CRM. That caused some "hefty rethinking," de Rossiter says.
That was Phase I. Phase II began in 1999 when the company did a "reset on all engineering projects." That kicked off IBM's Build Versus Buy project. And although there was a "parochial sentiment that said, 'We can build this' within pockets of the company," de Rossiter says, there was also a decision that IBM would be getting out of the commercial applications business.
So in January 2000 IBM partnered with Siebel to implement its marketing and sales CRM solution. IBM also resells Siebel solutions to its customers.
"That was the marking point for the second wave," de Rossiter says. "The difference is that this wave is about enabling technology across the company and across the world. It is strongly tied to our business model and how we service our customers."
The company is also in the early stages of deploying a new sales process for everybody in the company who is part of the process of selling to customers. It's all about a more common language and sales process, says de Rossiter, who notes that IBM is moving towards more process-oriented sales.
De Rossiter is certain there will be a Phase III or a third wave, but expects it will be
far less dramatic than the first two. She expects that changing customer behavior will drive it, and that it will include the expansion of Web components and will bring the entire customer-facing systems under a single umbrella.
IBM's CRM experience is filtering down to its customers, but de Rossiter says the company was also fortunate enough to have learned a lot from its customers along the way. "Many of our customers have already gotten to things that we're not near yet, because we are doing this on such a grand scale," says de Rossiter, who adds that IBM has accumulated pages and pages of interesting lessons on what it did right and what went wrong.
"In a company as large as IBM," de Rossiter says, "CRM is not the destination, but the journey." --CRM