CRM: Why companies are still on a learning curve

A Decade or so after the advent of customer relationship management (CRM) software - and almost as many years of project failure horror stories - things appear to be improving.

With fewer high-profile disasters hitting the headlines, and more best practice guidelines available for seasoned players and newcomers alike, it is becoming reasonable to ask whether CRM might finally be living up to its promise and providing organisations with concrete benefits.

According to Ed Thompson, an analyst at Gartner, the answer is 'no' to the first question but 'yes' to the second.

'CRM is delivering value, but it's not living up to its promise,' he says. 'The big issue is not so much outright failure, but that more than 50 per cent of projects are still not living up to expectations.'

Thompson believes the situation is improving gradually, with about one in five companies doing 'a cracking job', but the rest are still struggling, mainly because they 'can't get past the politics and other internal issues', he says.

Ashim Pal, a vice president at analyst Meta Group, agrees that the number of organisations obtaining benefits from CRM suites is growing, with many having learned from their own or their peers' mistakes.

But as a rule, most firms only implement about one third of what they originally pledged, and while 'the level of best practice is better, it's still not best', says Pal.

As a result, the market is far from saturated, especially as the majority of organisations have so far focused on introducing CRM into specific lines of business, such as their call centre or field sales organisation, rather than across the entire organisation.

'Companies have not done as much as they could, with many of their original projects being all about "me" to try and cut the cost and complexity out of customer interactions, rather than looking at what would improve the customer experience,' says Pal.

This means the question they now need to ask themselves is: 'are you happy with every interaction your customer has with you?', with the answer for most likely to be: 'there's a long way to go'. Clive Longbottom, service director at analyst Quocirca, says that for too many users, it is not simply a question of improving things, but of having to start again.

As many as two-thirds of organisations that were caught up in the first wave of CRM during the late 1990s and early 2000 'got it wrong first time', he says, which is resulting in about 50 per cent of that number now reviewing where they are.

Some are turning to additional technology, such as profiling software and search engines, to make their CRM applications work more effectively. Others are examining whether to rip out their existing systems completely and re-implement from scratch.

This is creating a surge in demand for systems integration skills and a reluctance among many firms to invest in new CRM suite functions after having had their fingers burned before. On the positive side, all this disillusionment has affected once-exorbitant pricing levels.

Jim Campbell, a consultant at Partners for Change, says licence fees have fallen by 20 to 25 per cent over the last year alone, which means 'the ball is in the buyer's court'.

So, in the light of recent experience, what are the reasons behind this continuing unhappiness with CRM, and where do the real problems lie?

Depressingly, says Campbell, the reasons that projects go wrong or fail to live up to expectations are the same as they've always been.

Too many organisations do not do enough homework before they embark on their initiatives.

'The goals become woolly and vague, the remit is far too wide, their expectations are unrealistic and they're not sure of the benefits they want to gain,' he says.

One of the key issues is a failure to define what CRM means to the company in the first place.

'It's essential to have a discussion internally about what CRM means both to the organisation as a whole and to different functional groups, otherwise it becomes a Tower of Babel,' says Pal.

The aim is to understand where the organisation is experiencing problems and to reach consensus on how to tackle them.

'You have to be clear why CRM is important to you, what you want to accomplish, and build up projects around your overall vision,' says Pal.

'This sounds simple, but it defies people time and time again.' A second big challenge involves organisational issues and politics, which requires a careful and well-thought-out change management approach.

'It's hard enough getting departments in one country to work together, let alone trying to do it across the world if you're a large organisation,' says Thompson.

'CRM projects often collapse because the politics are so big that companies end up with small reactive projects and no big picture of what they're trying to do.'

Leadership is a crucial element, as coming up with a vision is pointless if there is no one to take responsibility for forcing it through or to build consensus to ensure its adoption.

But taking staff along with you is also vital, because introducing shiny new processes and systems is fruitless if personnel refuse to use them.

'The top two reasons for CRM failure are lack of user acceptance and failure to populate and maintain data,' says Campbell. 'A CRM system is a solution that acts on data and is only as good as the data it holds. So if staff aren't happy with it and don't input that data, then the project won't work.'

The third area that causes organisations difficulties is getting their processes right, with too many simply automating inefficient ones or redesigning them to fit in with their chosen applications, whether this is best for the business or not.

'Changing the way your business works to fit round a package can be damaging, because your processes can differentiate you and may be what made you successful in the first place,' says Campbell.

But to avoid 'technology risk', it is important to refrain from over-customising your chosen system, because this quickly becomes costly and is the most common cause of projects becoming bogged down. 'It's about trying to strike a balance, but it's a tough call,' says Campbell.

Few projects fail for technological reasons alone, but a frequent mistake is to approach the initiative from a technical rather than a business standpoint.

'The only companies really getting value out of CRM are those with a CRM business ethic rather than a CRM IT ethic,' says Longbottom. 'Here, the project is driven from the top, the processes and means of dealing with the exceptions becomes ingrained and IT becomes the enabler, not the driver.'

Case study: Glasgow Rangers FC

'It's easy to say you need CRM,' says John McClelland, chairman of Glasgow Rangers Football Club. 'We all need it, but it's like saying you need quality. The problem is that some companies employ a sledgehammer to crack a nut and often their solution is too complex to manage and use, and too resource-consuming to maintain.'

Many systems are simply too big and complex to deploy for 'real practical CRM activities', and to make matters worse, require customers to 'build their processes round the system rather than deploy the system to fit in with their processes', he says.

As a result of these shortfalls, and after evaluating what application suites were on the market, Rangers decided to partner with Carnegie Information Systems to build its own.

The software, called Relatis, caters to the organisation's diverse business needs, ranging from ticket sales to online, retail and catalogue-based merchandising and the provision of hospitality services. Since the rollout of the system at the end of 2003, the club has opened six new shops - bringing the total to 20 - and greatly expanded the range of goods it sells.

'We're talking about £5m to £6m in additional revenues and resource savings of £1m, so the system has paid for itself many times over,' says McClelland. 'We couldn't have afforded to do what we do now without our CRM system, but it's helped us avoid significant additional people costs as well as provide the usual benefits such as improving customer service.'

But the real secret to CRM success is to adopt a practical, pragmatic approach and resist the temptation to make the project too complex, he says.

'You have to be focused on what the business really needs to do to meet its short and medium-term goals, because there's no one-size-fits-all in CRM,' says McClelland. 'Too many organisations try to use their system for, say, 50 areas of activity rather than focusing on 20 high-value ones, but that's just too costly in terms of people, resources and skills.'

Case study: Interface

'The secret is finding an out-of-the-box CRM system that is the closest fit to your business,' says Patrick Riley, vice president of business development at Interface Europe. 'But you also need to ensure that you have good internal project management, as you have to be very brutal about customisations for things not to get out of control.'

Interface, which provides floor coverings and fabrics to organisations specialising in commercial interiors, went through two failed attempts at developing its own in-house CRM applications.

'So don't write your own system because it becomes too complex and will soak up resources in ways you won't believe,' says Riley.

As a result, Interface hired consultancy Salmon to help find and implement an off-the-shelf multilingual sales force automation system that could cope with its complex pan-European indirect business model.

A key aim was to log information about activities relating to key purchase influencers and decision-makers, to gain a better understanding of future demand and reaction to new product launches.

A further goal was to reduce the time it takes new sales staff to become productive by about three months, by providing them with accurate customer information from the outset. Churn here is between 10 and 15 per cent per annum.

Interface decided to go with packages from Relavis because 'systems from the big vendors are not designed to cope with a multi-influencer environment without a lot of customisation, and we wanted an out-of-the-box system to keep costs reasonable', says Riley.

But adopting a trade-off approach was crucial to making the project work. While most companies aim to obtain sales information for management purposes, says Riley, this should not drive the project but 'fall out of it' as a by-product.

'Sales people don't want to give you visibility,' he says. 'They want you to think they do things in their own unique way, and it's always a challenge getting them to put anything on paper.

'So you have to ensure they get benefits. If they can see that using the system will drive orders, you'll achieve a return on investment and get the information you wanted at the same time.'

Making the most of CRM

Do your homework before you embark on a CRM initiative Focus on and define clearly what you are trying to achieve, understand what this will mean to the organisation in terms of business processes and technical integration, and establish what you mean by success. Metrics are important to demonstrate where benefit realisation is coming from.

Undertake small projects with an overall end-goal in mind Establish possible initiatives with a quick win, either in terms of high-impact benefits or speed of implementation. Quick wins can help build momentum and win over sceptics with the gains. But always keep an overall company-wide vision in mind.

Identify and manage cultural risks

Work out how you intend to ensure buy-in and tackle possible staff and management resistance to the new system. Strong leadership is crucial, as is communicating with those affected and involving them in drawing up requirements and providing feedback. CRM benefits are derived from employing data intelligently. So if staff refuse to use the system, the relevant data will not be available and the potential gains lost.

Balance process optimisation with package customisation Try to strike a balance between ensuring your business processes are as efficient as possible - which may require heavy customisation of your chosen package - and simply changing your business to fit in with your applications, which can be damaging.