Focus on the Essentials

By Peter Coffee  |  Posted 2002-04-29 Print this article Print

Focus on the Essentials

Rather than thinking of CRM as a product, enterprise IT builders will do better to think of CRM as the following set of process goals that should be pursued by every piece of IT infrastructure. When every link in the IT chain achieves those goals, improved knowledge and management of crucial relationships will have a chance to emerge, rather than being somehow imposed on a system built with other criteria in mind.

1.) End-to-end integration

Nothing kills a relationship more quickly than the feeling that the enterprise isnt really dealing with the customer, the employee or the supply chain partner as a whole—that every interaction takes place in a separate space, without awareness of the interlocking opportunities and needs reflected in other interactions at other times and among other activities.

Conversely, the enterprise that identifies and addresses such needs will give its customers a compelling case to favor that enterprise with profitable one-stop shopping, instead of needing to fight for every separate piece of the business of even the frequent buyer.

The process of integration has its own compelling logic. "Supply chain management started with optimization of inventories," said Nazhin Zarghamee, chief marketing officer at business performance measurement company Hyperion Solutions Corp., in Sunnyvale, Calif. "When that was tackled, though, people found they couldnt really address it without addressing shipment and other elements. There was also the issue of relationships being more than just moving the pieces but of integrating suppliers into the strategic side of the organization."

Massive integration is among the key reasons that Wal-Mart Stores Inc. has moved to the top of the Fortune 500. "Wal-Mart probably has the best single integrated database in the world," said Analyticis Horne. "Wal-Mart will penalize you, as a supplier, if your integration with their systems doesnt meet their standards."

Learning from Wal-Marts example, the enterprise with CRM ambitions should look beyond its own boundaries: Working proactively with supply chain partners will prepare the way for timely and reliable flows of useful and accurate data, instead of creating a CRM brain that is blind and deaf to everything outside its own little world.

Eliminating the speed bumps that impede the flow of data is crucial to CRM in the same way that proper design of data structures is the crux of any internal IT application. "What people want to know is simple," said Horne. "Business unit managers ask, Who is my customer, what do they buy, why do they buy from me, what else might they like? But most companies have these things in 42 different warehouses. Its the core knowledge base that needs to be fixed."

2.) Think in both directions

Almost exactly echoing Hornes words were the comments of the judges in eWeeks annual eXcellence Awards program when they evaluated a comprehensive field of entries representing CRM innovations of last year. In their final choice of E.piphany Inc. as CRM category winner, the team, led by eWeek Labs Director John Taschek, cited the need to "utilize customer-driven data in all its forms to improve services provided to those customers." (The complete results of the eXcellence Awards can be found at /article/0,3658,s=702&a=23530,00.asp.)

The eXcellence Awards judging team, including an industry participant from the supply-chain-intensive health care delivery business, honored both winner E.piphany Service and finalist Applix iCRM, from Applix Inc., for "excellent capabilities for integrating into existing enterprise infrastructures" and the ability to "measure customer input from all sources, including e-mail and Web."

Analyticis Horne emphasized the need to aggregate across the many different channels by which an enterprise interacts with any given entity. "Every transaction has to be correlated to an entity if youre going to do CRM," he said. "Accounts are not entities."

When a single entity, with many points of contact, appears to an enterprise information system as merely the sum of many separate accounts, valuable opportunities to identify related and interacting needs may never be able to surface.

At the same time, the enterprise needs to appreciate that the customer is also integrating an image of the enterprise across many separate channels. "It takes multiple impressions," said Horne, to establish trust, "and you have to build trust before people will interact with you." The enterprise must both build its own integrated image of the entities with which it deals and maintain a consistent image of itself thats constructively reinforced by every interaction.

3.) Measure what matters

Theres a built-in tension between the need to integrate existing data sources and the need to avoid being too tightly focused on what the infrastructure already does well. If the existing IT apparatus is entirely focused on meeting internal and operational needs, it may be difficult to find a mother lode of relationship-building insights under the resulting mountain.

"Most companies are data-rich and information-poor," said Horne. "Building a CRM system on an existing information infrastructure that is inwardly focused on company operations defeats the purpose."

It takes customer-oriented thinking to recognize the data that has value—and to improve data capture capabilities that enhance understanding of customer needs and preferences—instead of technology-oriented thinking that tries to squeeze value out of the data that falls most readily to hand.

Its almost frighteningly easy to build a massive CRM system that measures many things but not the right things. Zarghamee, at Hyperion Solutions, said, "Where were seeing people hitting a roadblock is on two fronts: not being able to align against strategic objectives and not being able to see what decisions will have the greatest impact."

The would-be CRM builder must therefore avoid the trap of being too successful at integrating across the existing infrastructure: One may win a whole series of integration skirmishes, while failing even to find the more important battlefront.

4.) Pick the right relationships

Suppose that a CRM builder is successful in unifying enterprise IT assets into a single, consistent view of diverse interactions, both internal and external. Suppose that business unit managers are completely aware of the factors that drive customer behavior.

Is the CRM foundation now properly laid? Not until the final connection has been made—the one that goes to the bottom line.

Unless customer profiles are examined in terms of what it costs to serve a particular customer, compared with what that customers business is worth, a CRM system can turn into a misguided automatic pilot—the kind that drives a company over a cliff.

Metrics may accurately determine that the lack of certain services is a major reason for losing customers, but it doesnt automatically follow that introducing those services is the right thing to do. There has to be realistic analysis of the companys core competencies and of the return-on-investment proposition. Failing this, the company may find itself chasing niche-market customers whose business it cant profitably retain.

5.) Track the moving target

To be sure, the ROI analysis has to be dynamic: The company must consider the steady growth of customer expectations, as overall levels of service in many industries are dramatically on the rise. In the long run, in any industry, customer service will rise to the point where a well-run business makes a competitive risk-adjusted rate of return. Any industry with prevailing profit margins substantially greater than market rates will surely attract new entrants, until the resulting competition restores the balance.

Whenever technology reduces the cost of the current mode of doing business, the windfall profit may be short-lived. No company should be too quick to say, "We dont need to do that, because no one else does." Tomorrow, or the next day, someone may.

What CRM can do is give enterprise managers early warning that a prospective service might be valued by customers who havent yet thought to request it; it can give those managers a head start on analyzing how new amenities can be offered in a cost-effective way that gives the most perceived value for the least cost.

This maximizes the advantage of existing customer relationships, rather than losing that advantage to the first-mover initiative of a new entrant into a market.

6.) Dont sneer at "soft" numbers

To make CRM an on-ramp to new business opportunities, IT must think on multiple levels about both internal and external data sources and about both hard numbers and soft estimates or research studies.

If IT staff members are congenitally unable to mix both hard and soft numbers, business unit managers will be severely handicapped in their ability to go beyond navel-contemplating analysis of current customers behaviors. Mutual respect must exist between the hard and soft disciplines involved in this collaboration: "There are a lot of technologists who think theyre marketers," said Analyticis Horne, "and a lot of marketers who cant describe what they want—they dont know what they dont know."

When CRM connections go all the way to the bottom line, they can help the enterprise avoid the trap of building revenue while destroying profitability. "What kind of promotions, what kind of loyalty programs, will most increase or diminish profitability? If you move up a product launch, what will that do to price pressures?" said Hyperions Zarghamee. These are the kinds of questions that CRM systems should be built to answer.

7.) Invite new opportunities

It wasnt a detailed study of cats, or even cat owners, that turned bags of cat litter into winter driving aids. Providing both added weight for traction and added friction for getting out of slippery situations, those bags of sand and clay found a whole new market when sellers started to promote this use.

Many other enterprises can take a valuable cue from the cat litter example: Dont turn CRM into a microscope that only tells you everything there is to know about the customers you already have, especially those youve kept for a long time with little effort. Ideally, CRM is at least as much an over-the-horizon radar thats always examining the edges of the operation—looking at the one that got away, studying the one that never quite got within reach.

Its relatively cheap to analyze data about the customers that the enterprise already has, but it should also be part of the charter of CRM to incorporate research into the characteristics of the customers who have not yet been acquired. CRM should not merely dig a deeper and smoother rut for the enterprise to follow in doing what its always done.

Peter Coffee is Director of Platform Research at, where he serves as a liaison with the developer community to define the opportunity and clarify developersÔÇÖ technical requirements on the companyÔÇÖs evolving Apex Platform. Peter previously spent 18 years with eWEEK (formerly PC Week), the national news magazine of enterprise technology practice, where he reviewed software development tools and methods and wrote regular columns on emerging technologies and professional community issues.Before he began writing full-time in 1989, Peter spent eleven years in technical and management positions at Exxon and The Aerospace Corporation, including management of the latter companyÔÇÖs first desktop computing planning team and applied research in applications of artificial intelligence techniques. He holds an engineering degree from MIT and an MBA from Pepperdine University, he has held teaching appointments in computer science, business analytics and information systems management at Pepperdine, UCLA, and Chapman College.

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