Mission Critical: Encouraging Collaboration

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Business entities certainly have a firm notion of boundaries, from opaque cubicle partitions to divisional P&L breakdowns. Yet provincialism is the bane of successful CRM.

"Without collaboration across departments, and the ability to cross stovepipes with customer information, a successful CRM strategy is impossible," says Liz Shahnam, a vice president at Meta Group Inc. "Many of the failure rates that have been quoted in the media are really not a failure of CRM technology or even CRM projects, it's a failure of the organization to communicate effectively across the enterprise." To survive in an increasingly competitive business environment, enterprises must collaborate effectively and coordinate customer processes across as many functions and business processes as possible, analysts and industry executives say.

Many companies find it difficult or impossible to coordinate their CRM efforts internally, to say nothing of bringing resellers and suppliers into the equation, because they cannot bring themselves to look beyond those inefficient, artificial concepts of their own departmentalism. Rather than organize themselves around the processes that influence and satisfy customers, companies fixate on traditional line-of-business organizational methods, which do not reward collaboration with others who are not members of their unit.

One place to see the distinction is in a company's sales function. "Once you define that lead management is an important process in a company, you help [employees] collaborate by explaining what role they play in the process, and change the compensation structure in ways that get them to contribute effectively," says Peter McCullagh, vice president of CRM strategy for Siebel Systems Inc. "Some companies have made the shift to horizontal or process-based structure, but it's still difficult, and many are still structured around functions or geographies rather than process."

Meta advises its clients to organize around four customer processes: engage, transact, fulfill and service. In this model, coordinating the behavior of each line-of-process are customer segment managers, who direct the company's CRM strategy and the role of each process in supporting the goals of the CRM initiative. They, in turn, take their enterprise cues from the chief customer officer.

Beyond the identity crisis, a collaborative, enterprisewide CRM effort should carry with it certain assumptions about the procedures and best practices that keep the company's ultimate goals--as a whole entity, not a division--clearly in mind, analysts and industry experts say. "A process that allows divisions to work together is that when sales gets a new customer, finance is alerted, the service department is alerted. This does not happen in most companies, but it should," says Rohit Kumar, senior director of CRM marketing for Oracle Corp. He also suggests using proactive enterprisewide alerts of perceived trouble between important customers and one of the customer-facing divisions, so each can work on corrective or soothing actions. "Those are the things that end up promoting greater customer satisfaction and generating greater value for the company," he says.

Extended Collaboration

There is no need to stop dismantling boundaries after conquering the internal challenges. Among some businesses, particularly those in consumer products and technology manufacturing, upward of 70 percent of revenue depends on indirect partners--and, by extension, the CRM practices of those partners, according to research firm Gartner Inc. Aggregate indirect partner revenue across all industries could reach 65 percent in 2010, says Gartner analyst Claudio Marcus. The sheer proportions dictate that collaborative CRM could become more than a good idea, but a fundamental matter of taking one's own fortune in hand.

Some call it partner relationship management (PRM), while others prefer to describe the phenomenon as enterprise commerce management (ECM). Terminology aside, extending a CRM strategy throughout a value chain means more than simply sharing leads and shipping promotional flyers in a timely manner, analysts say. It is also a sleeping giant. While close to 1,000 companies made investments in PRM software through mid-2001, most are still shelfware, not even in the implementation phase, Gartner reports.

AMR Research Inc.'s crystal ball for ECM describes an intricate web of technology and methodology, including business processes from CRM and enterprise resource planning, as well as e-commerce and automated trading exchanges and supply chain management. Because technology integration solutions built for their own sake are in deep disfavor, there is a tangible, realistic goal for ECM, says AMR analyst Bob Parker. "The vision is to be able to do ad hoc venturing," he says.

Parker describes a scenario that would allow a manufacturer and retailer to team up on a promotional product bundle, coordinating everything from the production process to financing, packaging design, fulfillment, merchandising and post-promotion breakdown through a single interface. The joint CRM efforts of the two firms would play a role in determining the content and scope of the campaign, and their enterprise resource management systems would likewise be called upon to coordinate production, delivery and payment. But a private trading exchange, or PTX, is required to make these collaborative processes work properly, he says.

Parker and fellow AMR analyst John Bermudez go so far as to recommend the PTX as "the single technology face to the outside world." They contend that a PTX, essentially an expanded digital marketplace, is the best mechanism to govern the flow and interaction of goods, services, data and money between companies because it is intimately engaged with each on an enterprisewide basis. "We always felt there wasn't a lot of value [in public exchanges] until you could deeply integrate into the back-end systems of the membership. You have to do these private exchanges first," Parker says.

Collaboration Hurdles

The PRM discipline is based on the backlash from the widespread efforts to use the Internet to go direct throughout the late 1990s, according to Gartner's Marcus. "In the mid 1990s, manufacturers thought they could disintermediate the channels and go directly to end consumers," Marcus says. "They initially thought it would bring them closer to the customer and enhance margins, but as they strived to provide the level of sales and service customers were used to, the margins did not bear out. They realized that effective selling to customers would remain best handled by indirect sales and indirect channel partners."

PRM needs to extend beyond the humble goals of prospecting and announcing promotions, Marcus says. He criticizes early efforts as not concerning themselves sufficiently with identifying and acting on the unique strengths and weaknesses of individual partners. If possible, he recommends, encourage partners to build their own profiles to help the manufacturer gain a better idea of the needs of the marketplace and how well they are being met by available reseller talent.

The danger with so much volunteered information from a partner about its own position and market potential is that it could be beneficial to lie. "Cisco [Systems Inc.] had to write off a huge amount of inventory recently, because they had a lot of distributors and VARs overstating their needs in boom times in order to get product," Marcus says. The solution was to build in a system of rewards and punishments based on how well partners met their goals.

There is also a need for a substantial upgrade in lead distribution to meet the standards of PRM, Marcus says. Rather than forwarding prospects to a generic inbox, the lead originator should be able to pass it directly to the most relevant person within the partner's organization. While it sounds suspiciously like an attempt to disintermediate a reseller's sales management, prudent firms will cooperate, he says. "The faster you get a lead in the hands of the right person, the more likely you are to close the sale." To allay fears, a partner's sales management should provide the lead routing rules for its own organization.

Long known for reporting on the relatively high failure rates of CRM, Gartner has even begun to preemptively predict PRM's struggles, with Marcus projecting a 50 percent failure rate for PRM projects stemming from failure to properly engage participation from channel partners. He recommends looking for buy-in opportunities "early and often" and carefully monitoring the time commitment required versus the benefits conveyed for participation in a PRM strategy.

To date, most visions for this sort of widespread CRM collaboration originate with the manufacturer of the finished product. However, with data standards and process integration still an open question, that may not be feasible. "The potentially flawed assumption built into them is that your downstream partner is smaller than you are and willing to adopt your processes," says David Bradshaw, lead analyst of eCRM for research outfit Ovum. "That doesn't work if you're a small manufacturer and Sears is your downstream partner."

The View That Matters

Much has been made of customer-oriented collaboration. The topic has particular resonance in complex business-to-business relationships. Oracle is expanding its Product Development Exchange application so it is not just a prototyping collaboration tool, but a life-cycle monitor that carries information through the entire slate of involved parties, from design to customer. "You need the post-sales cycle to track the defects and pass that information to the suppliers," Oracle's Kumar says. "These were traditionally not CRM applications, but you need these systems to talk to each other."

Companies with little channel or supplier exposure are still looking for ways to better collaborate with customers.

DHL Worldwide Express vice president of customer service Mike Sears wants to make sure that the company's E.piphany Inc. system keeps detailed tabs on the needs and wants of customers based on their package type, destination and the reported courtesy of DHL's drivers. But just as important, he wants the system to make the best use of the customer's time. Sears is enhancing cost performance in the call center by watching how customers choose to collaborate with his people. "We'll be able to determine who calls us the most and what channel they prefer, and if somebody never uses the IVR [Interactive Voice Response], we may never offer them the IVR," he says. Conceding that self-service channels tend to be less expensive, however, he hopes to collaborate with the sales organization to communicate the automated alternatives--subtly.

Collaborative-CRM advocates realize they are setting aggressive goals, and not just because they wish to bury the comfortable notions of enterprise boundaries. From a technology standpoint, multiple IT organizations and separate customer-facing systems across different divisions can stand in the way of seamless internal collaboration. Ovum's Bradshaw believes the economic slowdown may make the situation worse, because the widespread freeze on spending will inhibit companies from establishing corporatewide CRM projects. "Many people are going for tactical CRM...using each move they make to get closer to an enterprise level."

Technology aside, many companies are simply not aligned to embrace the kind of cross-functional communication and cooperation that enterprisewide and extra-enterprise CRM requires. "The bottom line is that the organizational culture has to change," Meta Group's Shahnam says. "This means a behavioral change from chief executives, it means changing incentive compensation, changing the way people are measured, and the way the company thinks about itself."

Keep in mind that not all of the advantages to collaborative CRM are revenue-related. AMR's Parker relates giving a presentation on Web-powered ordering and fulfillment systems to a roomful of independent tire retailers, who were relatively unimpressed by the notion of placing orders online, but were "floored" by a revamped warranty claim submission process. "They sometimes spent half their day calling the manufacturer, because warranty replacements are a big part of their cash flow," he says. "There may be other post-sales processes that become important. A company thinking about customer collaboration has to think about those post-sales and pre-sales processes that are the real keys to relationship building."

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