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Scrooged Again
Companies practicing customer-centricity (i.e., enterprise CRM) have been lying for decades. They have been telling untruths to themselves, and to others, about what customer-centered management really is, and what is truly required to deliver it.
For the rest of the December 2003 issue of CRM magazine please click here
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Over the past year companies will have spent both money and effort on their customer "identification and interaction" relationship management programs. They may see some gains within product groups, divisions, or departments. But they will not have increased the overall value of their organization.

Next year will be the same. No Ho Ho Hos for most companies. No big gifts. No big gains.

The reason? Companies practicing customer-centricity (i.e., enterprise CRM) have been lying for decades. They have been telling untruths to themselves, and to others, about what customer-centered management really is, and what is truly required to deliver it.

In fact, I unhappily predict that with the exception of a handful of firms around the world, companies will look into the future and up into the sky, but no magical ghosts will visit to deliver the precious gift of increasing value to shareholders.

This is because companies are scrooging themselves by taking a miserly approach to the biggest value-creation idea since the Industrial Age: the concept of the company organized around serving its high-value customers. But this is the year to finally change from past mistakes and begin to profit from the future.

For the book Angel Customers & Demon Customers, authors Larry Selden, professor emeritus of finance and economics at Columbia University School of Business, and Geoffrey Colvin, senior editor at large of Fortune magazine, interviewed many leading companies in the United States and around the world.

Funny. Companies insist they are customer-focused. They say they are committed to their customers' success. They see themselves as putting customers first. But very few have yet to design their organizations around the specific customer groups that deliver profits on a consistent basis. This is the sweet spot. Instead, as the authors state, "Every one of these companies is still organized around products, functions and territories."

The really big idea in moving to a customers-at-the-center organizational design is in capitalizing on customer data. In the words of the authors, "It's creating value from what you already have."

CRMA research, which studied 30 leading companies in retail, financial services, and telecommunications, found the same issues as Selden and Colvin:

  • Companies do not begin by identifying their 20 percent of customers who deliver 80 percent of the profits.
  • They then do not package these customers into segments identified by similar needs. (CRMA refers to these segments as high value needs groups, or HVNGs.)
  • No one person is accountable for each of these HVNGs.

Selden and Colvin identify the leading reasons that companies have not reorganized into the customer-centered design. Obstacles include precedent and habit in accounting practices from our Industrial Age forebears, and the difficulties of unmaking the existing, siloed structure. But the biggest barrier to redesigning the organization, Selden and Colvin say, is mindset.

Unless managers see how to link the technology they have purchased to the customer-at-the-center business design to deliver profitability, firms will continue merely to manage data and information. They will not be capable of creating value through customer knowledge.

So here, then, is my final toast to the season: Let's make 2004 the year to exorcise the ghosts of seasons past. Let's begin anew, redesign our siloed entities into customer value creation companies.

Laura Pollard is president of CRMA (Canada). She is also a part-time professor at the University of Toronto and president of the CRM consulting firm Accelerate Growth Management. Contact her at lpollard@accelerategrowth.com

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