Leadership Issue


14 April 2008


Scott Nelson tells Jim Banks why CEOs must take on the unfamiliar role of customer relationship management optimisation.


Customer relationship management (CRM) systems, in various guises, have been deployed by organisations in many industries, in some cases as a core element of a business model, in others as a disjointed set of solutions that only deliver on a fraction of CRM’s potential.

In many cases, companies rely on the technology behind CRM, which grows ever more sophisticated, but miss the wider importance of these solutions for their businesses. Getting the most out of CRM means looking beyond the technology to see the changes to an organisation’s processes and, potentially, its business model that are required.

Seeing CRM in this wider context requires a strategic perspective, according to independent research firm Gartner, which means involving CEOs. On the face of it, this is not their traditional territory, but their decisions nevertheless influence the effectiveness of CRM and its role in an organisation.

"CEOs create a lot of initiatives that are CRM, but they don’t call it that."

"CEOs don’t think about CRM as a concept, and there are many priorities that come before it. But what they may not realise is that they are involved with it already," says Scott Nelson, vice-president and distinguished analyst at Gartner. "A big issue CEOs face is how to grow their business despite the economic downturn. For some companies, growth through acquisition has been exhausted, so one option is to grow their customer base and bring in new customers to existing markets. That is exactly what CRM is about. CEOs create a lot of initiatives that are CRM, but they don’t call it that."

Elsewhere in the organisation, CRM tools are recognised more, but there is often a disconnect between CEO and CIO. "The CIO worries about things like security and the flexibility of systems infrastructure, and will be aware of CRM technologies," says Nelson. "The key is to build a bridge between the goals of the CEO and the awareness of the CIO. They don’t use the same terminology, but they share similar core initiatives."

SOPHISTICATED SYSTEMS

CRM solutions that automate customer processes offers businesses great potential to increase their efficiency. The systems themselves are becoming more sophisticated, moving beyond point solutions to support the management of a company’s relationships with its customers more holistically. System developers are adding more powerful analytics tools to support decision-making processes and improve the accuracy of forecasting.

These development trends certainly elevate CRM to a more strategic level, feeding more directly into budgeting and planning, but Nelson says that technology is not the first step in successful CRM implementation.

"CRM is not software. It is about understanding the customer experience," he says. "Technology is a piece of it, but customer processes are often poor, if not completely broken. So, by automating, you just create a more efficient way of annoying your customer. You need to think about your processes first." Nelson stresses that CRM systems must be viewed in a wider context. Companies can no longer afford to invest only in point solutions, but must see how the technology will affect other parts of the organisation. "There is a ripple effect with any implementation. Improving one process might exacerbate other problems," he says.

"It's time to move away from the product-centric view of business and towards a process-oriented, customer-centric perspective."

Nelson gives as an example of this an insurance company that has synchronised the number of claims it can process at the front end with the capacity of its payments department. When the front-end adjuster process is automated, without corresponding automation of the back-end payment function, the company finds that claims are suddenly not being paid. The front-end now generates too many claims for the back-end to handle, creating a growing backlog. Enquiries about delayed payments slow the process even further, as do the meetings and committees needed to identify the cause of the problem.

"Automating a function needs a broad perspective," says Nelson. "CRM solutions were once disparate and discrete, each one solving a piece of the puzzle. Now they are more joined up, automating whole aspects of business, such as marketing. Enterprise resource planning vendors have comprehensive suites that offer front- and back-office automation.

"There are also analysis tools that allow you to sift customer data for useful information, even if you are not a statistician, so that management can see where to invest time and energy. Analytics tools improve the accuracy of your forecasts and make you more aware of what is going on in your organisation, so you adjust quickly," he adds.

But he warns that linking systems together to unify processes does not mean that those processes are what a company needs. "Companies are not process-focused, especially in areas such as marketing," says Nelson, "so they need to break down processes and redesign them around customer needs before they automate. It’s time to move away from the product-centric view of business and towards a process-oriented, customer-centric perspective."

CEO ROLE

Changing the culture of an organisation to make it customer-centric requires senior executive commitment. CRM technology is key to this transformation, as is a review of all business processes. Both of these can have a major affect on the structure of a business. Big changes need the backing of the CEO.

To see how customer-centricity can become the core of a business culture we might look at Amazon, which has set itself the goal of becoming the most customer-focused organisation on the planet. CRM is instilled in corporate culture, and at every stage of a new initiative the company asks how it will benefit the customer.

Some actions will still be taken for operational or financial reasons, but customers’ needs are considered when evaluating strategic decisions. Some companies, such as Sears Holdings Corporation, have appointed chief customer officers (COOs) to the ranks of senior management.

"Companies go to consultants instead of their customers, which is why CRM is sometimes called 'consultants raking in millions'."

Every company needs to develop its own unique customer relationship strategy, and when it comes to implementation, a CEO should be given time to get to grips with CRM. Nelson and others recommend phasing in CRM solutions slowly and carefully to allow CEOs to cope with the learning curve.

"You don’t do CRM with a big bang," says Nelson. "It is a gradual process, and you learn as you go along. Find some ‘pain points’ – such as too much email within the company – and you will see a rapid payback and add value for your customers. Then you can look at issues such as organisational restructuring and process redesign. The new corporate culture will evolve gradually.

"Take the low-hanging fruit and then make incremental changes – and involve your customers in CRM, which is something we don’t often see. Companies go to consultants instead of their customers, which is why CRM is sometimes called ‘consultants raking in millions’."

Nelson sees signs that companies are shifting their perspective on CRM and are accepting the customer-centric model. This transition may take time, but then it should.