• December 1, 2006
  • By Marshall Lager, founder and managing principal, Third Idea Consulting; contributor, CRM magazine

The New World of Sophistication

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The specifics were always a surprise, but 2006 had the sorts of twists and turns we've come to expect. And because the business world is neither static nor tame, December's issue always seems a good one through which to reflect on what we saw in the previous year before we close the books. Smart businesspeople know that without time to consider market changes, decisions are made based on bad data. So let's use what we know to attempt to figure out what we don't know. Making decisions: It's what strategic planning is all about. Customer understanding has grown from number crunching to warm intimacy, and the crude mashup integrations of 2006 are giving way to more refined fare. The new year has yet to arrive, but CRM thought leaders already have a good idea of some of the challenges the industry faces in 2007. Have You Ever Been Experienced? CRM is all about the customer--it's what the first letter in the acronym stands for, after all--but churn remains a major issue: A growing body of research shows that loyalty is fleeting, and customers will often drop a vendor after a single negative experience. Studies and common sense alike tell us that most people have bad experiences as customers at one time or another during the year. It's no surprise, then, that Sheryl Kingstone, program manager for Yankee Group's Customer-Centric Strategies service, saw a lot of emphasis in 2006 on easing the customer experience maladies plaguing businesses. "The biggest trend is improving the customer experience. The top projects that fall under this umbrella include the unified agent desktop, customer self-service, enterprise mobility, and predictive analytics," Kingstone says. Companies that are ahead of the pack already possess or are now adding these capabilities. The rest will need to catch up. The agent desktop is a smart place to begin if customer service agents are supposed to keep callers happy. Yankee Group research uncovered that only a handful of contact centers require agents to learn fewer than three or four applications, according to Kingstone. Most contact centers have at least 10 and sometimes 20 different information sources, which makes it difficult for CSRs to find the correct information quickly. "Our survey showed that 72 percent of the respondents using a CRM system still had not achieved a single view of the customer across all touch points," Kingstone says--a central issue for CRM. Sometimes it's better to put the power to resolve problems into the customers' hands first, which explains the continued refinement of self-service options in 2006. "Self-service experiences are not just being implemented for decreasing costs, but are now a requirement for improving customer loyalty," Kingstone says. Customer service is one of the few differentiators that a company possesses. As a result, well-executed, good, or superior self-service is now a crucial strategic component of the overall customer-centric business strategy. And customers increasingly make self-service their first choice for primary interaction. To derive maximum value from self-service, according to Kingstone, companies must optimize the value of their customer interactions and not focus solely on self-service as a cost-saving mechanism. Companies must offer effective self-service as a singular but comprehensive component that provides a wide spectrum of service offerings. "Facilitating poorly executed self-service with static knowledge bases, offering no contextual guidance, and providing inconsistent customer data and processes will increase costs and degrade the customer experience because dissatisfied customers must contact costlier channels to get the right answers," she says. "Poorly executed self-service is worse than no self-service at all." Predictive analytics is a growing field that has already led to a more dynamic customer experience. Explosive growth in data volumes and data source proliferation has created a demand for better business intelligence and analytic technologies to be incorporated into CRM initiatives. Companies have and will continue to focus on CRM as a key driver for improved business performance. "However, it's critical to shift the focus from primarily automation and efficiency toward improving performance with insight generated from the sales, marketing, and service systems," Kingstone says. Some of the shining points in 2006 were marketing resource management, business intelligence, and predictive analytics technologies (data-driven technology options for achieving the next level of value from current CRM investments). "Many companies are trying to assemble a coherent picture of the customer from scattered information located throughout the entire enterprise. It would be analogous to a 100,000-piece puzzle with half the pieces missing--not a very effective strategy to improve the customer experience," Kingstone says. Despite exponential data growth, businesses can still achieve actionable insight and customer success by making strategic decisions based on quality analysis, not quantity of data. "The key," Kingstone says, "is to build on sales, marketing, and service process efficiencies created with CRM by injecting actionable insight. By adding analytics, companies can create better relationships and increase success." Getting Intimate
Kingstone is just one of the industry luminaries to predict increased efforts along the customer experience line. "The year [2007]--if we don't have a recession--is lining up to be a big one for customer experience and customer centricity," says Denis Pombriant, managing principal of Beagle Research. "The important thought is customer intimacy"--true understanding of what customers think they want, among other things. There are two issues at stake, according to Pombriant: cocreation of value, and collaboration on marketing messages to capture the voice of the customer. "Communispace is one company that's doing the latter, building and running private online customer communities," he says. We saw several attempts at this in 2006, with mixed results: Communispace has been relatively successful in its approach, while ostensibly customer-based services like MySpace have been co-opted by marketers and have taken some licks for it. In the former, cocreation of value--the experience of providing input--will lead the customer's interactions. A vendor that tries to involve a customer before SKUs hit shelves is telling him he matters as more than a source of income; the company wants to understand what the consumer needs and will make him happy. All of this is speculation, of course. An improved economy may well bring this to pass. Still, this article goes to press in early November, and there's a significant national event about to take place one day later that will, most probably, reshape economic conditions. As Pombriant suggests, "There's still every possibility that things will tank after the election." Keep in Contact The call center industry hasn't been stagnant this year either, and next year should continue to hold interested parties' attention. In 2006 we saw that IP continued to open the door to integrating technologies that satisfy customers' desire for choice when contacting a company. In turn, IP is allowing companies to be more efficient when responding to different customer contacts. IP-enabled systems for contact routing management seamlessly integrate with CRM for efficient handling of each contact. Several acquisitions took place around this concept this year, including Intervoice's takeover of Nuasis in September. Daniel Hong, senior voice business analyst at Datamonitor, remarked at the time on the combination of "speech self-service with a next-generation IP contact-center application that includes multisite virtualization, multimedia routing, BI, monitoring and reporting, CTI, and outbound capabilities." Other significant moves include Spanlink's acquisition of Calabrio and Verint's acquisition of Mercom. As more contact centers seek to take advantage of IP technology, virtual contact centers with as-needed staffing, real-time monitoring, and, of course, the universal desktop, vendors will have to create or buy the capability to serve them. The smart vendors will work to standards and open architecture, remaining switch-independent rather than tying their solutions to a particular technology. "In 2006 we saw the continued move toward embracing open-standards architecture. This is no longer just a trend in the IT department, but is now a strong business value that is helping companies determine their strategic direction," says Bob Ritchey, president and CEO of Intervoice. "Several years ago we began to transition Intervoice to a new direction, one based on open standards and converged voice and data networks. The objective is to accelerate our multichannel automation and IP contact-center product strategy. More customers are demanding choices in how they engage with a company--immediate assistance (live agents), deferred assistance [live agents responding to email and voice messages], and engaging with the company via self-service [Web, phone, or IVR]," Ritchey says. Companies are continuing to struggle, however, with how to manage multiple customer service models. "Today's customer-routing-management software applications leverage IP technology to integrate all three service models into a single consolidated software application on the corporate data network," Ritchey says. Thus, companies that launched software-only IP-based contact routing architectures in their contact centers learned that IP enables these service modes to be easily and cost-effectively integrated with CRM to automate the routing and prioritization of customers based on customer information in the CRM database. In short, customers are getting better service quicker, without straining the contact center's resources. Moving Platforms So you think mobile CRM is old news? Think again--enterprise mobility is still a hot topic, and many businesses are reevaluating their current sales and service implementations with a new focus on end-user requirements, business process improvements, and anywhere access, according to Kingstone. Email remains a top driver for initial wireless deployments, but many companies are now planning for more strategic wireless applications. An average of 44 percent to 64 percent of respondents from "The Yankee Group 2006 Transatlantic Wireless Business Survey--U.S. Large Businesses" stated that SFA, field force, and Web browsing of corporate apps are the next critical application focus. As ever, these new mobile solutions must deliver process-oriented interactions that improve users' efficiency and effectiveness. "Ultimately, mobile solutions need to deliver the right information at the right time to improve sales productivity and service quality, visibility of accounts and sales, and accuracy," Kingstone says. "The convergence of field sales applications and the wireless revolution is important. Enterprises can improve sales usage rates by not only rethinking existing deployments, but also creating applications that take advantage of the new medium." New technology is making mobile devices (and desktop ones, for that matter) more capable and interesting than ever before. "Platforms and mashups were the big developments this year," Pombriant says. "The full impact won't be felt until 2007 and beyond." Mashups, for those of you who have been hiding under a rock, are Web sites or Web applications that combine content from multiple sources to form a seamless integrated experience. The growth of on-demand platforms and service-oriented architecture has made mashups a reality. "We saw the development of a few true platforms"--AppExchange and NetFlex are two of Pombriant's examples--"and this is the harbinger of things to come, removing complexity from end-user integration." Instead of cramming a do-everything app onto a wireless device, users can access a single site or app that carries out queries and delivers the results back to the device. Some of the earliest mashups seen in the CRM world have been integrations between customer databases and mapping programs from the likes of Google and Yahoo!, but that's just scratching the surface. "The mashups of 2006 will look like Model Ts in the not-too-distant future," Pombriant says. "In 2007 we'll begin to see more elaborate and sophisticated mashups of peer applications. Multiple point--solution vendors will rise up and create meta-applications to create end-to-end business processes for customers." [See the sidebar.] The mashup will give way to something smoother and more complex, a melange or pate, if you will. It could be the end of separate marketing and sales applications. In the meantime there's integration as a service (IaaS). This is an attempt to make bridging the gap between on-demand and legacy applications less troublesome for users. According to Pombriant, it could be a very important market on its own, for getting larger enterprises invested in SaaS and helping to rationalize the costs in committing to new technology. Where Do We Go Now? This is just a sample of what's going on in CRM as we turn the page from 2006 to 2007; the industry is accelerating once more, and the transformations of 2007 will likely outpace anything we've seen. Exciting times. Predictions are never sure things. Nobody can say what one new application, business process, or even a unique way of looking at a particular vertical will do to the CRM space, but tech is driving innovation, allowing visionaries to create business processes that serve the company and the customer better than ever before. Contact Senior Editor Marshall Lager at mlager@destinationCRM.com. Best-of-Breed Becomes Metafied: An Observation Denis Pombriant, founder and managing principal of Beagle Research, from his blog at www.beagleresearch.typepad.com One of the big ideas that I hope will come out is what happens when you define an end-to-end business process and then look for specific applications that you can string together via [integration technology] to produce automation for all the points along the way. I don't think that's very far-fetched and I have seen one or two vendors iterating toward that outcome. I will call the new solution class, when it appears, meta-applications. The differences between meta-applications and traditional best-of-breed approaches are several. First, best-of-breed implied a couple of applications working together and, second, the applications have usually been brought together at the customer's expense by high-priced integrators. No matter how many times an integrator put front- and back-office applications together, the engagement always seemed to be happening for the first time, with all the attendant costs and risks. Meta-applications will be different because they will be integrated by visionary vendors (on their nickel) that understand the larger business processes involved and that know their individual solutions alone do not suffice. Meta-applications will be symbiotic groupings of applications and vendors offering out-of-the-box integration of technology in support of specific business processes. The emergence of meta-applications will be an important next step in [easing] the disruptive innovation that on-demand computing has become. With that innovation, the cost differences between on-demand and on-premise solutions will continue to grow and the decision processes that buyers face will become even more stark.
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