Bigger Isn't Always Better

Small and medium-size businesses (SMBs) require a different approach to CRM--one that minimizes risk and cost and increases return on investment. Contrary to popular opinion CRM does not have to be a multimillion-dollar proposition. For SMBs, which I define as businesses with fewer than $750 million in revenue, CRM makes sense for many reasons:
  • Greater productivity through improved process-management capabilities and increased information sharing
  • increased revenue and profits due to improved customer segmentation, targeting and product development
  • shorter cycle times through the automation of processes and integration of systems
  • CRM technology is more affordable than ever. Implementation costs have also come down as the technologies have improved.
  • CRM technology adoption in the SMB market is below 20 percent, according to Gartner estimates. As a result firms adopting CRM can capture significant competitive advantage. CRM success is predicated on a firm's ability to meet specific criteria. First, all CRM capabilities must be aligned with the firm's product and customer strategies. Second, executive management must become deeply involved and support the implementation efforts by ensuring cultural and performance metric alignment. Finally, implementation must be guided by a well-designed rollout plan. This article addresses the final success criterion: the formulation of a technical rollout plan that minimizes risk and cost, while maximizing returns on CRM investments. While these goals are applicable to firms of all sizes, they are especially important to SMBs. CRM does not require massive technology investments. Rather, it entails moderate investments deployed through a well-thought-out, phased approach. Specific CRM technical capabilities can be grouped into three categories with escalating degrees of implementation risk. Category 1: Process management: the ability to understand in near-real time customer-facing process performance and to collect relevant information. Examples include measuring the sales pipeline or forecast, knowing the number of high-priority service requests currently in the queue, and capturing information about a customer's strategic objectives. Category 2: Business integration and automation: the ability to automate processes, such as generating a follow-up activity for a field salesperson when a customer service request is received at the home office. Category 2 also addresses the ability to integrate related systems (e.g., general ledger and manufacturing management) with CRM applications to add value in other areas, like creating a sales pipeline for operations or providing the status of placed orders for salespeople. Category 3: Intelligent business implementation: the ability to implement a flexible operating model that automatically assigns operational processes based on business intelligence. For example, automatically routing a customer to a specific service process based on calculated, or intelligent, factors like estimated lifetime value, current profitability, or most-likely-to-purchase scores. SMB Deployments and Benefits CRM deployment scenarios in SMBs should be thought of differently from large company deployments. Large companies are in a better position to implement CRM capabilities from all three categories in one well-structured engagement. Due to their organizational infrastructure (independent business units and technical architecture), vast resources, and well-documented processes and metrics, they are able to accept more project risk, while potentially gaining higher short-term returns. As a result the recommended deployment scenario for a large firm is to implement functionalities from each category within a business unit, or around a smaller business entity, such as a customer segment. Once each entity has been addressed, the firm should then work toward overall business integration. SMBs are usually in a different position, primarily due to their smaller scale. Their business units are often more tightly integrated, organizational boundaries are usually lower, and they do not possess the same level of resources of larger companies. The financial analysis for an SMB must show payback in months, not years. So where should SMB executives start? They must first focus on improving process management capabilities in all customer-facing processes in each business unit. Next, executives should integrate systems and automate activities throughout the company. (Before embarking on this phase strategic thought around issues like target-customer segments, specific process structure, sales-and-service strategies, and marketing plans should be assessed for appropriateness.) Finally, SMB executives should implement intelligence-driven business models across all customer touch points. This approach allows the SBM to accrue benefits before moving to more complex functions. The expected benefits from each category are: Phase1: Process management Process management is relatively easy to deploy (assuming processes are not in a state of flux), because it has a relatively low impact on the way the company operates. The primary change-management risk lies in getting users to adopt the tool. However, the benefits can be significant:
  • higher marketing hit rates due to improved customer segmentation and targeting, using newly collected customer information
  • higher productivity (shorter sales cycles, increased close rates) due to increased management visibility of the sales pipeline and customer-related activities
  • lower process costs by managing resources away from low-value customers toward high-value customers Phase 2: Business integration Automating and integrating business functionalities entails additional change management and technical risk. As a result, this category of CRM capabilities is best left to mid phases of work. However, the benefits can be significant:
  • improved productivity by decreasing information access times
  • shortened cycle times by eliminating hand-offs and associated waiting times
  • reduced operational costs and inventory levels by improving forecast visibility
  • improved customer satisfaction by setting realistic customer expectations (i.e., delivery dates) Phase 3:Intelligent business implementation Business intelligence and the ability to execute on developed insights represent the holy grail of CRM. However, higher risks driven by technical and change-management factors justify implementing intelligent business models in later phases of work where significant benefits can include:
  • increased revenue through identification of cross-selling opportunities
  • decreased inventory costs through improved forecast accuracy
  • lower operating costs by matching investments with customer value (e.g., expensive processes targeted at high-potential customers) CRM does not have to be as daunting as many executives believe. The risk of CRM failure is significantly reduced, while the probability of generating significant returns and competitive advantage is increased, when SMBs evolve their CRM capabilities through multiphased deployments. CRM is a science, and a well-thought-out implementation structure can lead to great success. About the Author Richard Miller is CEO of Oakdale Group, a CRM consulting firm with offices in Chicago and Atlanta. He has more than 10 years experience developing and implementing CRM-related strategies, processes, and technologies. Prior to founding Oakdale Group, Miller was a consultant with Inforte, Arthur Andersen, and Ernst & Young's Emerging Market Group.
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