Redefining CRM

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Want to find out how the CRM user community defines CRM? There's no better way than taking questions posed by CRM adopters to Internet Q&A services. And what are they asking? Based on my experience fielding questions on two of these sites, the two most common questions dead-on define how CRM users perceive CRM. These questions are, in the order asked, "Which software should we use?" and "What the heck is CRM, anyway?"

Technology followed by confusion. That's my take on how the user market is defining CRM. I do wish a few more people would ask the second question first. After all, what's the point of spending a gazillion dollars on some thin-client, thick wallet, star-spangled software system before you have a clue what to do with it? Of course, the software guys may have already told you what to do with it--"Buy it." But that's another story.

Are you curious about why so many erstwhile CRMers wait until after the fact to pop the "what is it" question? I was. So I asked organizational development guru Bill Brendler, who specializes in rescuing "software first" technology implementations.

"Companies are racing to embrace CRM technology, but what they don't realize is they've got to redesign their company first. The real opportunity comes from taking the time to rethink their relationships with their customers--to figure out how to put them in charge of their company. Sometimes I really think that business leaders believe the technology is going to figure this out."

No kidding. Software is the ultimate shortcut. So they try software first--and only start asking "What is CRM?" after they fail to create more than misery and confusion. But regardless of when the question finally gets asked, those supposed to be "in the know" about CRM have to decide how to answer.

We've sure got a lot of nefarious definitions to choose from. Hey, it's the definition of the month out there. Put most of 'em together and you come up with some Internet-disabled, web-tied, process-bound, privacy-raiding techno-vapor. But there's some good stuff floating around, too. For example, Bob Thompson of Front Line Solutions, which hosts the "CRMguru" Q&A service (www.crmguru.com), describes CRM as "a business strategy to select and manage customers to optimize long-term value. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales and service processes. CRM software applications can enable effective CRM, provided that an enterprise has the right leadership, strategy and culture."

For me, that about covers it. And I especially relate to the "software applications can enable" part, as I've been involved in several significant CRM successes that involved little or no technology. However, the reality is that most of us can't drink CRM without at least a teaspoon or two of technology. So let's try a similar definition that spells out technology's role more plainly to those having difficulty visualizing CRM without technology conspicuously in the picture.

CRM is... implementing customer-centric business strategies; which drives redefining of functional roles; which demands re-engineering work processes; which is supported, not driven, by CRM technology. Essentially the same definition, but expressed as four sequential steps, each driven by the step prior. And surprise of surprises (at least to me), after testing it on many different groups and individuals, I can say that this definition does break through the technology clutter and stick with folks. And it even works with people not directly involved with CRM but needing or wanting to know what it is. What a relief. And what a lot of breath and keystrokes saved.

CRM is a four-step process:

 Implementing customer-centric business strategies.

 Which drives redefining of functional roles.

 Which demands re-engineering work processes.

 Which is supported, not driven, by CRM technology.

But let's not stop at a four-line description. After all, we're about defining CRM, not just describing it. So let's drill down on each one of these four steps.

Customers First
First we'll discuss implementing customer-centric business strategies. The time to start going "customer-centric" was back in the eighties. After forty unbroken years of sellers' markets, the supply-demand curves had started switching from excess demand to excess supply. In other words, in customers' favor--a direction that continues today with ever-increasing velocity. But we didn't really start going customer-centric back then, except for a small minority of businesses. Instead, most continued trying to tell customers how to behave, rather than responding to them (the root of customer-centricity). Hey, that stuff is so deeply entrenched in our corporate culture that it's taking us an extra ten or fifteen years to respond to stimuli, and we're still struggling to respond.

But we did feel increasing customer pressure to do business their way, so we tried to fake it. First, we invented "target marketing," which was little more than shriveled up mass marketing with no emphasis on individual customers. Next we embraced database marketing, the same impersonal stuff with fake personalization. Then we came up with the concept of "customer intimacy," which meant little more than sticking both hands in customers' pockets. And on the opposite extreme, we even had the "we love our customers" bit from the wear clogs and walk on granola crowd--complete with visions of holding hands in circles with customers singing "Kumbaya." Hey, nothing more than placebos companies took to avoid the harsh medicine of actually making our companies customer-centric, which is not what most of us who have been there would call "fun stuff."

But finally, more companies are getting to customer-centricity. Especially now that we've got impatient customers' fists waving in our faces. We're seeing progressive companies stepping back and figuring out how to create "win-win" with customers and then converting these "win-win" opportunities into customer-centric business strategies. And when one leading company in a business segment "gets it," fear of getting aced out motivates competitors to hop on the customer-centric bandwagon. Domino stuff. What FedEx did to UPS. What Nordstrom's did to competing department stores. What 3M Company has done in lots of industries. What Saturn did to retail car sales--although the culture of the rest of General Motors' may be pulling Saturn "back into the fold."

This is step one. How CRM starts. Observe, however, that if CRM starts here--with adopting customer-centric strategies--CRM starts at the top of the organization with executive management. Middle managers, even functional heads, can't initiate enterprise-wide, customer-centric business strategies. Sure they can try, but they'll only get shot down like low and slow flying ducks on opening day. Bottom line, starting CRM at the middle management and staff levels means one of two things: either the company is already customer-centric, which very few are yet, or headed down the tubes, at least with CRM.

Functional or Dysfunctional?
Next, we move on to redefining functional roles. Unfortunately, when it comes to customer-centricity, "doing it" is proving just as hard as "getting it." That's because most of our business organizations start off organized around internal functions--not customers--making the change to a customer-centric business model an organizational mine field. And almost all our information systems start off the same way. That is why managing customer information across the enterprise, rather than each department holding its own customer information, is more organizational problem than technology limitation.

Take a minute and think about how roles and responsibilities are organized in your company. You've probably got a marketing department, a sales department, a customer service department, an accounting department, a credit department, maybe a product engineering department, either a manufacturing or operations or service delivery department, maybe logistics.you get the picture. And every department has its own leader and staff--and turf. Not very customer-centric. And trying to become customer-centric while maintaining this type of organization is nuts. Hey, leave your organizational structure as is, and you'll treat customers the way you always have. As Freud says,

"Insanity is doing the same thing over and over again but expecting a different outcome."

So think about the impact a CRM initiative that starts with customer-centricity will have on your place. Pretty significant organizational changes required, no? In order to respond effectively to customers, sales and marketing better start looking like twin sons of different mothers. Customer service should move into the front office from the back office, where it's been tied to accounting. Some sales and service functionality had better shift to the Internet--and some other sales functionality should probably migrate to service. And while we're at it, perhaps order entry should move out to sales, along with product configuration. Perhaps product engineering may become a customer contact function, and not strictly internal. And product management will almost certainly scale back in importance, replaced by customer segment management. Manufacturing might schedule runs according to customer priorities, rather than strictly manufacturing efficiencies, which means they need sales data. Accounting will have to push transaction data to sales, instead of hoarding it. Legal will have to find accommodation with customers, rather than sticking odious contracts in customers' faces. Had enough?

Sort of like putting the organization into a big jar and shaking it--hard. Maybe even violently. But only "sort of," because the outcome of jar-shaking is random. The outcome of making your organization customer-centric is highly predictable, based on the first CRM step you took--developing customer-centric business strategies. After all, you wouldn't want to try operating with an organizational structure that's at odds with your business strategies, would you?

The good news is that more and more companies are willing to tackle the organizational changes required by CRM. Sometimes because they're forward-thinking. Sometimes because they're scared. Sometimes because there's less risk in attempting these changes than in standing pat. Whatever. This too is finally happening.

Work Flow Control
The third step is re-engineering work processes. It may seem like restating the obvious to say that now you have to re-engineer your work processes, because everyone's doing different stuff. But equally obvious is saying you can't re-engineer work processes without changing roles and responsibilities first. That can only happen in an intelligent way following development of customer-centric business strategies. As in taking step one and step two before attempting step three, process re-engineering. Yet we keep right on trying to start on that third step. The almost inevitable result reminds me of a story about my Uncle Frank. Seems he heard noises in the middle of the night coming from downstairs. So he got up out of bed to check things out. Next thing you know, my Aunt Pauline hears a tremendous crash and clatter that could only mean one thing. So she yelled down, "Did you miss a step, Frank?" To which he answered, "No, I hit every damn one of them."

That's the way it is with CRM. Miss a step and you'll hit every one--hard. And you may have a very hard time getting up afterwards.

Hey, if you take steps one and two carefully, process re-engineering will flow right out of redesigning functional activities--just as redesigning functional activities flows right out of developing customer-centric strategies. With one big caveat, however.

Until CRM came down the pike, process management was a four-letter word among sales and marketing people. Still is to many. Consequently, front office folks have no front office process model to follow. So they do the understandable. They borrow a process model from the back office. And the model they usually borrow is far and away the most popular one--"balanced flow," which is a lower case expression of the world-renowned "statistical process control" (SPC) approach. Trouble is, SPC and balanced flow rely on reducing work flow variances to the lowest possible levels. While that's not always easy for manufacturing and operations, usually it's at least somewhat doable.

But not so in the front office. Not so because we have this wild card called "the customer" out there, and the customer calls most of the shots. Yeah, we can try to control customers. But we rarely succeed. Of course, we can try to mitigate customer variability by giving them something in exchange for being more predictable. But our customers have a hard time being more predictable unless they can make their customers more predictable. And so on up and down the supply line.

Bottom line--"balanced flow" is usually a bust in the front office. Hence, we're starting to see more use of a less-popular process management approach called "restraints management," which is a lower case expression of the "theory of constraints" (TOC) model. TOC works by anticipating variable work flow volumes and maximizing throughput under variable conditions for each group of sequential processes. How? By increasing resources at critical "bottlenecks" that occur when flow increases. In other words, if field salespeople can't cover their customers during peak demand periods, you'll do something like cross-train some inside folks to go into the field when needed. Or develop a customer-acceptable alternative to peak sales period coverage. Or simply carry enough salespeople to meet peak demand--and cross-train them to do other stuff or accept them being underutilized during slower periods.

There's lots more to TOC than that, but let's not go off on a toot about it. The point is--don't try to apply back office process management stuff in the front office, or you may set yourself back a bunch.

Tech Talk
Now we can finally address technology issues. After completing the following three steps, you'll find you're supporting work processes (not driving them) with CRM technology. Almost inevitably, newly defined CRM work processes require more structure and information management support than old ones. In fact, in most instances you can't effectively carry out what you've designed in steps one through three without additional technology support. Especially when the new processes to be carried out have to be carried out by sales and/or marketing. Running that show without the structure and discipline provided by CRM technology--hey, it's like herding squirrels.

Now, if you're already running CRM software in your organization, you're probably rolling your eyes, saying, "Yeah, sure. That software is just going to roll over and support our exact processes. You betcha." Even if your total exposure to CRM is checking it out at a conference expo, your eyes are probably more white than green. But get 'em back in their sockets, because you can do this. You can make CRM software support your work processes, not vice versa.

Here's how. First, ignore all the "our system adapts to any requirements" hype you'll hear from vendors. In fact, the developers of the systems that come closest to pulling that off are too modest (or realistic) to make presumptive statements like that. Next, you need to take control of the process of buying software away from the software sellers. And the best of the software companies actually encourage you to take the lead. Then, with your hands on the wheel and your feet on the pedals, you need to clearly define your needs--and ask competing vendors to show you how they're going to meet them. Some friends of mine in technology project management call that "proof of concept." And if someone asks you for a contract before showing you how their system will conform to your needs, show them the door.

Oh, and one tip on making your requirements explicit--to yourself as well as vendors. Back when you're mapping your work processes--one step at a time--also detail both your process control and information management support requirements--one step at a time. That's step three driving step four, just like it says in our CRM definition. And don't ignore seemingly minor stuff like, "Field reps need to work offline with full data and functionality" or "Reps don't have access to telephone connections." For example, if either of these crop up, you'll want to wash your hands of "thin client" CRM solutions that relegate remote workers to accessing not only their data but their software functionality over the Internet (or dial-up connection). You'll also want to flush away any thoughts about application service provider (ASP) CRM technology for the same reasons--although those aren't the only reasons to flush away ASPs.

Okay, enough about software. You can read about software anywhere. It's all the stuff that comes before software that gets ignored. But that raises one last important point. How the heck did we get from relatively simple sales automation, which pretty much encompassed only process re-engineering and technology, all the way up to this earth moving thing called "CRM?" And in the space of just several years?

The answer is simple. We didn't.

Few things have hampered CRM more than the assumption that there's a migration path from sales automation to CRM. Saying that SFA grew into CRM is like saying a board grew into a house. No way. SFA, even the warmed-over SFA falsely termed "CRM" because customer service and marketing automation are added in, is purely tactical. CRM, real CRM, uses tactics such as automating processes and customer information management to help achieve a much larger vision. A customer-centric vision.

Oh, and one last thing. Have you noticed that we've defined CRM without once mentioning Web stuff? Unfortunately, lots of light-headed, web-footed critters have taken to equating Internet selling, marketing and service with CRM. Sorry, but that's another version of substituting tools such as process re-engineering for strategies--or trying to. Unconvinced? Well, ask yourself this. Does using the Internet inherently build strong, healthy customer relationships? No, it does not. In fact, just think of all the e-tail and even eB2B endeavors that now look like bug splat on your windshield. Wiped out because they weren't what customers wanted. While lots of Web initiatives are working with customers, if we persist in trying to define CRM as Internet stuff, "www" will wind up meaning "we were wrong."

So let's start defining CRM for what it is--and nothing less. And let's start defining it before we try it. Shall we?

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