A disciplined, ongoing process is required to deliver quantifiable value in which IT, business and finance staff, and vendors work together to establish business-value metrics during the planning process, and then measure and continually improve them after deployment.
Posted Apr 26, 2004
It is time for CRM vendors to take a more active role in working with their customers to maximize the quantifiable business value gained from their products and services. The ROI analyses being used during the sales process are a great first step. Unfortunately, these tools typically wind up on the shelf once the deal is closed. Instead, a disciplined, ongoing process is required in which IT, business and finance staff, and vendors, work together to establish business-value metrics during the planning process, and then measure and continually improve them after deployment.
Well-executed business-value metric programs focus the solution team on the actual business value gained, while providing insight into potential problems and their underlying causes. An actively involved vendor can contribute valuable processes, tools, and best practices for deriving business value from its products and services.
The continuous value management process
The five steps of a continuous value management process are:
Identify the key value areas of the potential project and define a select set of business value metrics that will quantify the effectiveness of the solution (including people, process, and technology changes) in addressing the desired business results. For example, increasing revenue via upselling new services with a key value metric being service revenue per customer.
Develop the business case
Develop the business justification based on the expected improvement in the value metrics. ROI tools are still important, but only when used as an integral component of an ongoing value planning and delivery process. For our example above, the related increase in total service revenue relative to the people, process, and technology costs would provide the expected ROI.
Implement metric capability
Design and implement metrics measurement and analysis process, data, and technical mechanisms. In addition to the value metrics, analysis metrics should be used to monitor progress and identify the sources of inevitable problems. For our example, supporting analysis metrics includes leading indicators for monitoring the effectiveness of each of the steps of the impacted business processes, i.e., number of service opportunities, number of qualified prospects, number of proposals, and number of committed customers, as well as comparisons of the relative results of different user communities (e.g., geographies and product groups).
Measure and communicate actual results.
Continuously improve value
Actively improve the results by monitoring effectiveness, analyzing outcomes versus targets, and taking action when necessary. In our example, our CRM team is now able to proactively monitor how well the business process is working. If there are problems it can determine which step in the process is the likely culprit (e.g., generating opportunities versus closing prospects), and which regions and product groups are performing well versus those needing more assistance.
What is your vendor's value maturity?
A value maturity model (VMM) is useful for assessing the value management capability of key vendors and internal organizations, and then developing action plans for moving forward. An example VMM is summarized below, specifying the five distinct levels of neglect, promote, commit, demonstrate, and continuously improve.
Companies that are looking to maximize the value of their CRM investments should:
Recognize that the business case is only the beginning of the value management process; ongoing measurement and continuous improvement are vital to success.
Determine the value maturity of your key vendors, use it as part of your selection criteria, and leverage it during ongoing vendor relationships. Be wary of those suppliers that only focus on ROI during the sales process.
Establish clear internal senior management accountability for all metric targets; do not "outsource" accountability to the vendor.
Have vendors put some skin in the game, but also proceed cautiously. Both sides will likely be learning, so start with some simple relatively small bonus payments related to one or two metrics that are closely tied to the impact of the solution. As both sides become comfortable, evolve from there.
These benefits have long been understood and leveraged in other parts of organizations using methodologies such as Balanced Scorecard and Six Sigma. It is time to apply this discipline to CRM.
About the Author
Dan Merriman is president of Chapin Consulting Group. He helps corporate users and vendors of technology increase the business value gained from their major initiatives. He can be reached at email@example.com
| ||Level || Focus|
| || Neglect -- complete lack of focus on value ||Technology, functionality |
| ||Promote -- active discussion and promotion of expected value ||ROI calculators, case studies |
| ||Commit -- senior management takes responsibility for value targets ||Review/sign-off during justification ||Demonstrate -- actual value enabled is passively measured via consistent process || Consistent, disciplined measurement process |
| ||Continuously Improve -- value is actively improved over time||Ongoing analysis and improvement processes |
A 60 percent failure rate suggests that process change requires behavior change.