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October 27, 2006

What is CRM, Really?

CRM is not technology. This is a sentence I have spoken possibly more than any other one sentence in my career. Now, the truth of the matter is that it is a little more complicated than that, especially since there is technology that is categorized as CRM. I would like to take this opportunity to sound off on a topic that I find causes some confusion.

Customer Relationship Management, most commonly referred to as CRM, is an approach to optimizing the interactions your company has with its customers. CRM is really all about managing customer touchpoints for fun and profit. Now, why get all caught up in my shorts about this issue of CRM not being technology? The answer is connected to the naïve belief that implementing CRM technology alone will solve customer interaction problems. Most of the time when you throw technology at a problem as complicated as customer touchpoints you are destined to make matters worse. In fact, this has often been the case for many companies.

For the far majority of companies that want to improve the outcomes they achieve from managing their customer relationships, the effort required must involve a number of different organizational elements. Typically this means making adjustments to policy, processes, skills, attitudes, and also technology.

In fact I recently ran across an article in Industry Week that proposed that CRM has become one of the top five mechanisms for managing organizational change, up there with others such as TQM and process reengineering. This is a pretty significant amount of progress made since the mid 90’s when CRM first hit the market as the next killer app.

However, it is still quite common for companies to equate an investment in CRM to strictly the effort required to implement software. This narrow consideration for planning a CRM program has led many organizations into great peril. This is all made more difficult with the siren song of software sales and marketing professionals lauding their wares for achieving great business benefits. It is true that amazing things can be done with the current generation of products on the market. Never has the technology been so good.

Don’t get lured into the rocks on the shore by the CRM software siren. If you are thinking about taking this CRM voyage be prepared to address more factors than only the introduction of new technology. If you view CRM as a total business approach to better managing customer interactions, you will be more successful (and have more fun and profit).

October 20, 2006

The Third Profession

When I get asked what I do for work during social encounters, and I am in a whimsical mood, I will often reply that I am in The Third Profession. Normally this invokes raised eyebrows. So, we all know the first profession, and the second is, without question, the legal profession. Much like hookers and lawyers, consultants are at the top of the list when it comes to making jokes about one’s profession – making consulting the third. I am accustomed to it, in fact, I just heard, for the thousandth time, someone tell the one about asking a consultant what time it is. What shocked me was that the individual repeating this joke acted like he was telling it for the first time and laughed hard as if it were really funny.

What is much worse about the jokes is that I have had many encounters with clients and prospective clients that act as if consultants are evil, as if I actually would steal their watch. Is this a deserved perception? Maybe – I have heard some horror stories, and I have cleaned up plenty of messes made by others. But I need to go on record saying that I know a monstrous number of consultants and nearly all are extremely decent and hard working people. I am happy to live with the jokes, but I think the attitude toward consultants hurts the clients more than the consultants. Consultants can and do provide critical value to companies in need of the right help.

Why do you need a consultant? I think there are three general circumstances that pretty much represent the wide array of reasons.
- Pair of hands – this is when you need help because you don’t have the time to address the issue – managing process change is an example
- Subject matter expert – this is when you don’t have the knowledge for addressing the issue – technology selection is a good example
- Change agent – this is when you need an objective outsider to help guide you through a change process – facilitating strategy development is a common example
- Combination – many situations warrant one or more of the three in combination – introducing a full SFA or CRM program is a great example

Under any of the above circumstances, utilizing an external consultant is likely going to have great pay back, helping you achieve your business objectives for a reasonable investment. In fact the ROI for the utilization of consultants is often highest compared to the use of other external professional resources because you are often causing an impact to your ability to grow, save costs, or improve your customer experience.

So how can you choose a consultant wisely? Having been on both sides of the table many times, I have some experience that leads to the following suggestions:
- Chemistry is huge – don’t ignore your feelings when you interview a consultant or a firm. If you don’t feel comfortable it means something. You are inviting people into your castle; don’t let them be barbarians.
- Date first – if you need help with a long engagement, find a way to start with a smaller, limited engagement to make sure the relationship is good. This will minimize your risk.
- References count – and examples are really good too. Ask for explanations of how they encountered similar problems as yours with past clients and ask them to describe the solution and outcomes. A consultant that can give multiple examples of problems, solutions, and outcomes has most likely got the right stuff.
- Bigger is not better – larger consulting firms do have a broader range of skills, and may have more flexibility in resourcing. However, they can have a tendency of filling your project team with junior people in order to learn at your expense. Smaller companies cannot afford unhappy clients and they tend to do everything they can to leave you satisfied.
- Cheaper is cheaper – be aware of the low cost provider because you do get what you pay for. Good consulting firms demand a premium because they are, well, good.

Consultants should not be confused with those who sell their services for pleasures of the flesh. It is OK to make the jokes, but when you hire a good consultant you are going to get a return on your investment, and it won’t need to be treated with antibiotics.

October 13, 2006

Has the pursuit of ROI become out of fashion in CRM?

It seems that way. Back in 2002 when we were all up to our eyeballs in alligators due to the recession it appeared that every customer wanted to talk about conducting a return on investment analysis or build a business case to justify their CRM budget. Now the companies I talk with indicate that it is “just a given” that they have to make the investment. My how times have changed.

However, I am not fooled into thinking that we can afford to take our eye off of the proverbial ROI ball. The benefits of having a good business case for CRM program investment go beyond strictly convincing the board to approve program funding. Back in 2002 the programs with a strong business case also had some of the most clearly defined CRM strategies as well.

Why is having a CRM strategy so important? The simple answer is that the more clearly defined the strategy, the greater the likelihood of success. There is both evidence and logic to support this statement. Evidence can be found within the plethora of analyst reports coming from companies like Gartner that show strong correlations between program strategy and program success. A significant number of the reports I have seen put strategy at the top of the list for predicting success or failure. The logic behind this is pretty straight forward. If you put in time to define what you want to achieve with a CRM program, it increases the likelihood that you will actually identify the correct tactics to get there as well. And further, if it is clear where you want to be, you have a better chance of knowing when you are not getting there, and therefore you know that you have to take corrective measures to achieve your endpoint.

The great thing about developing a business case is that it forces you to think about the end state or Outcomes of your program. I believe that having a clear sense of the Outcomes is the key to successful planning. The more you understand your Outcomes, the better the chance of consensus on your end state, the greater the likelihood of setting correct expectations, the better the chances of setting and monitoring metrics, and the better the likelihood of knowing what capabilities and tactics are needed for the program to be successful.

Ultimately, if you do a good job of targeting your CRM Program Outcomes you will know what business benefits to expect from your investment. From there you can build a hard or a soft business case, depending on what you need for budget approval. Either way, Outcomes never go out of fashion.

October 06, 2006

My Favorite Customers

During a recent initial meeting with a prospect I was asked, what are the typical characteristics of my favorite customers. I really love this question because it allows me to expound on a topic that I don’t usually have the license to discuss very often. Some people might say that they like well funded customers, and some prefer attractive or funny customers. I have even heard some consultants say that they prefer less experienced customers because it gives them more opportunity to mold their thinking. Not me – I prefer very experienced customers - the more scar tissue the better.

First, I should probably offer a short explanation of what I do for a living, which will provide some insight into the type of customers with whom I work. I am a management consultant, focused on business transformation, and I work with companies who are trying to improve the business outcomes they achieve from working with their customers. The company where I currently belong, Innoveer Solutions, is a CRM Consultancy. We help our clients work more effectively with their customers. I personally get involved with making recommendations to my clients regarding their CRM programs – how to best plan them, how to best implement them, how to best optimize them after implementation.

So, my definition of a good customer is one who heeds the advice I am being paid to provide, and, one who actually acts upon it. Please don’t think that I state this with unnecessary bravado or hubris – my job is to provide advisory services after all, and I do stick to topics I am experienced within. I don’t, for example, advise people how to invest company profit or how to avoid paying taxes.

What I have learned is that those customers who listen best and are most likely to act on my advice are those that already have had some experience with the nature of the advice, and their experience did not go as originally expected. These customers have learned that things can go wrong. They tend to be realistic. As a business transformation consultant, I am typically advising my clients how to complete an organizational change and the content of that advice is often focused on how to reduce risks. Experienced customers have seen that those risks are real and are more likely to listen to suggestions for their mitigation. Less experienced clients don’t always believe that the risks require the level of effort recommended and want to find ways to cut corners (which typically translates into cutting effort and costs).

Don’t get me wrong – I don’t want to offend anyone with overgeneralizations. I have worked with many good folks who were going through their first CRM journey and through establishing a good level of trust they have been very good at carefully following advice. However, overall, I do think that those with scars have a tendency to listen best. Having said all that, I will also add briefly that I do enjoy working with nice people, too.