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March 28, 2008

Don't Get Trapped

At about the same time that Tata announced that one subsidiary would be acquiring Jaguar and Land Rover from Ford another Tata subsidiary was announcing the results of a study measuring CRM program effectiveness. To be frank, I hope they do better with the luxury cars because the study results feel a little embarrassing to me. What is most disappointing is that the evaluation focused on metrics such as finishing projects and on time and on budget as a measure of success. Even back in the 80’s we were looking for more than that from project evaluations.

So, what should we be measuring? I think there are four levels of metrics, which include project level measurements such as completing on time, but go beyond into three more advanced categories. By the way, it is not bad to measure projects at the project level – it is useful to monitor how well projects are being managed. It is just not sufficient.

A second level of measurement for technology-based CRM projects is to measure whether the technology is functioning correctly. When it is not working as expected, it needs to be adjusted. If it is working as expected, but there are still issues with performance, then you need to look at the next level of measurement.

I think a focus on capabilities, the third level of measurement, is probably the most critical for CRM projects. CRM is all about building more effective customer-facing capabilities, such as campaign management, lead management, account management, and service delivery. If your CRM program is not actually achieving more effective customer facing results, such as campaign lift, close rate, penetration, and service quality, then it is truly not making the mark. It does not matter too much if the campaign automation implementation was completed on time if ultimately it does not improve lift.

Then of course there is always the fourth level of success, actual business outcomes that justify the investment. We do want to improve revenue, efficiency or customer satisfaction and it is important to monitor this level as well. However, it is not always easy to make a solid connection between CRM program investments and business outcomes, primarily because of all the variables that are hard to rule out. Not impossible, but it is hard. This is why I place my emphasis on the third level.

If you do improve the performance of your customer facing functions, you are more than likely going to see bottom line results. If you don’t see the improvement, any bottom line change is pretty much going to be due to some other reason, not your CRM program. Therefore I place the biggest emphasis here.

By the way, just because your CRM project takes longer than expected, it may not be that you have a problem with anything other than your time estimation skills. It is far more important to build capabilities than be finished on time. If you have to take one over the other, go for the capabilities (although I have had clients that believed being on time was more important than actually building the needed CRM requirements.). Sometimes a focus on good project management takes a priority over good business results. Better not to get caught in this trap.


March 21, 2008

Tear Down The Silicon Wall

On a fairly regular basis I get asked to work with organizations that are unhappy with their CRM programs. They want to know why they cannot achieve what they were led to believe was going to be possible. So, we go in and conduct an examination of a number of factors, many of which are common culprits. The things we typically find that get in the way are mostly involving the lack of a sound CRM strategy, insufficient management consensus on what the program should achieve, varying usability issues that drive poor adoption, and then there is the IT function.

If you take a look at the research reports provided by the industry analysts you will see different studies that show a common set of factors that continuously compromise CRM programs. We also repeatedly find the same set of factors, with one exception, that being the last item on the list above. I have never seen the IT function listed in these reports because it is politically incorrect. The analyst firms are completely underwritten by IT subscribers and the technology companies that they are analyzing. You can’t bite the hands that feed you.

But I ask the question, is your IT department playing a gatekeeper role with regard to your CRM system? Is there a shroud of mystique veiling what your system can and cannot do? Are you limited by a silicon curtain?

Please don’t send hate mail. I am not on a personal crusade against the IT function. I have family and friends that reside there. However, it is very important for this strategic business function to be fully aware of when they are serving as a source or the source of limitations to the efficacy of a very critical business solution. In other words, if IT is causing some of the problems, they need to own up to it. I do see this situation arising on a more common frequency than you might believe.

How does this come about? I have seen multiple reasons. Most commonly this is the result of insufficient skill and resources. The folks in IT are asked to do more than they are capable of and they have simply given up on saying no. A worse variation of this is the under resourced team that won’t admit that they can’t handle the task. Many times the IT function is asked to run the CRM program and they run it as a technology project, not recognizing the heavy business and organizational requirements involved. Implementing CRM is not like implementing Outlook - it requires an immense amount of business context.

Some IT functions want to keep the CRM system from getting too hard to manage and support, so the philosophy is to contain it. Supporting the business takes a back seat to managing the application. There are also functions that waste cycles in turf wars with the business or the implementation vendor. Politics get in the way of producing a good solution. These last two scenarios are not as common as the former situations, but when we run into them they can be the most devastating to the effectiveness of the program and hardest to correct.

Once again, this set of observations is meant to be constructive. I have never met a CIO or Director of Applications that was intent on sabotaging the success of a CRM program. But, while this may not be driven willfully, the effects are still the same – CRM investments are compromised. IT has a tough challenge with the mission to both support the business and also serve as the steward of the company’s technology assets. Optimizing the assets can sometimes appear to get in the way of serving and maintaining the correct balance is performed on the edge of a razor. Awareness is the important thing. Keeping the dialogue going with the business is the key. Don’t let that tough project status meeting you just returned from become another brick in the wall.

Pigeon Wall

March 14, 2008

May the Force be with You

Old Gun

Should you treat your indirect channel as if they were your salesforce? Sounds like it should be pretty obvious, but is this a trick question?

Most of you out there have some form of indirect business model, partners or distributors who sell your products. On the other hand, some of you sell entirely through others who represent your products to your customers. They are your salesforce. But, should you treat them as if they were your own salesforce?

I think the answer is yes, and no.

If they were your own salesforce, would you help them sell as best as they can? From this perspective I believe the answer is yes. Help them sell just like you would your own people. First, incent them by paying for performance, but ask them to comply with the rules of engagement. This is a no-brainer. Second, provide them product knowledge and training. I would like to think this is a no-brainer, but I know of some companies who could do better with this for their resellers. Third, provide them leads so they know toward whom best to expend selling efforts. You would do this for your own sales reps.

You mean you don’t send leads to your distributors? They get leads from you but you don’t qualify them – but would you qualify leads for your own reps? These people are your salesforce, why not send them the best leads possible? Improved lead quality translates into improved sales – is that not your objective even though the sales reps work for somebody else?

Finally, would you provide your own sales reps with analysis on what is working and what is not working, who is buying what products and who is not, where potential exists and where it is already penetrated? Do you provide that to your resellers? If you did they would sell more. So, treat your indirect channel like you would your own people if you want them to sell more.

Yet, again, this question of how to treat your resellers is complicated. You might not want to treat them completely like your own. For example, do you treat your sales reps with equality? This one is a little thorny. We treat employees with equality by law and also in principle. We want to give them all the same chance to be successful and they are mostly subject to the same remuneration policy (by country at least). However, your resellers are not individuals – they are organizations, and they are very much not equal. Don’t fall into the trap of thinking you need to treat them equally. Nice principle, bad outcome.

We give sales reps all the same product knowledge and training. You might choose to do this with your indirect channel, or you might not. It is possible that you might give your best training to your best partners, investing more in them than in others. Smaller, less capable partners may not pay back on the greater degree of investment.

Should you distribute leads in a fair and equitable manner? Absolutely not! Your highest producing resellers should get the best leads, as they have the best chance of converting them to sales. Do you give equal access to analytics to your different resellers? I wouldn’t. This should be distributed based on level of commitment – the highest get the most analysis.

What about compliance to the rules of engagement – should this be done with equality? The knee-jerk reaction is probably of course. Rather, I think this is an inverse relationship as compared to some of the other factors listed above. Rather than giving more compliance freedom to your best partners, make them play by more strict rules. For example, if they want to be in your top tier, receive the best margin and have the best access to leads and analysis, they also need to provide the best quality of information back: forecasting, lead quality feedback, pipeline information. The little guys may not be able to comply with this – especially if you are using CRM systems to capture the data. You do want your top producers, the 20% who make up the 80% of volume, to play by your rules. Why not? They are successful because of your products and your marketing and sales support efforts. They need to comply with the rules to subsidize that success.

Generally speaking, it is a good idea to segment your resellers based on capability and commitment. They may be able to work their way up the segmentation model, or they may be limited to a category that their abilities allow. Either way, these organizations are not equal and will work best for you if not treated with inappropriate equality. Companies that don’t have formal segmentation models tend to evolve informal systems that are less effective in their outcomes - best to acknowledge this and make the most of your segments.

May their salesforce be with you.

March 07, 2008

Corporate Entropy

Back in college I had a novel assigned in a literature class that turned out to be a discourse on the strong forces of entropy that constantly surround us. I don’t recall the name of the book or author any longer, but I do recall that the conclusion was depressing – everything is bound to fall apart.

Now, just as a reminder, entropy is a physics concept best explained by the notion that once you take simple things and make them more complex (such as assembling raw materials in the construction of a house) these complex entities are destined to eventually be reduced to their original elements (rent a copy of The Money Pit for an illustration).

The only way you can beat entropy is to keep putting energy into the process – repaint, reshingle, rewire. But, once you ease up on the effort of adding energy, entropy takes over and everything crumbles, dust to dust.

Pretty much everything in the universe is subject to the laws of entropy. It appears, however, that contemporary organizations are, somehow, exempt – maybe it is Frederick Winslow Taylor’s fault. At some point, probably after the industrial revolution, organizations began to defy the laws of physics.

Having thought about this for a bit, it seems to me that once a company reaches a certain size and complexity, the dynamics of the organizational system take over. You don’t need to keep adding energy to maintain the complexity, it gets more complex through its own inertia. This is a lot like Arthur C. Clarke’s HAL, the system develops a will of its own.

A case in point, Phillips, the Dutch electronics conglomerate, recently came to the realization that it was suffering from this affliction. It had grown too big and complex and it was getting too hard to manage effectively. Ironically, it had to put significant energy into the process of simplifying the business. Entropy is supposed to take care of this for us, but Phillips grew into a state where entropy no longer applied. (It conjures up the Talking Heads song with the line, “Somewhere in South Carolina / Where gravity don’t mean a thing”). Phillips even went so far as to declare a simplification day when all 125,000 employees spent the day applying mental energy into the process of brainstorming means for simplifying their organizational existence.

Diablo Decay

Don’t worry - it gets worse - organizational sub-structures seem to have also evolved into this physics-defying ability as well. For example, we have all witnessed those committees that formed seemingly eons in the past, but still meet weekly. They may not actually have a purpose, but getting them to disband actually takes more effort than simply allowing them to continue, so they do.

CRM programs too can achieve anti-entropy status. They get so big and convoluted that they can’t be stopped. Crappy utilization and suspect data even fails to get in the way. Some CRM systems are like HAL on steroids mixed with HGH (although they have gone on record at congressional hearings vehemently denying their use).

I have multiple clients, who like Phillips, are putting significant energy into CRM simplification in an effort to make things more manageable. And many more have taken smaller steps, such as taking advantage of software upgrades as an opportunity to drive complexity out of their CRM programs. This need for simplification is a huge driver in the trend toward SaaS – hosted solutions are easier to unplug. But, who knows, maybe even these programs will evolve and start to take over as well.

So, a couple of conclusions:
First, if you feel that things are too complex, you are probably right. It may be time to cause some self-inflicted entropy. Look for ways to devolve. On the other hand, if you are just getting started, the best advice is to not do anything that will even remotely enable the creation of the next HAL (place a premium on simplicity).