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Taking the Pledge for CRM Success, Part II

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Posted November 14, 2001 By Arthur O'Connor     Feedback

Arthur O'Connor continues with his open letter to executives who are struggling with CRM implementation. This article discusses the second point: using a portfolio management matrix to evaluate an integrated strategy.

Photo Arthur O'ConnorThis is the second of a three-part open letter to corporate executives who are struggling with making CRM successful in their organizations.

In Part I of this installment, I outlined the qualifications of the three-point pledge and described in detail the first pledge and promise, which can be summarized as follows: Don't adopt new technology without a clear understanding of how it can generate economic benefit, given its potential risks and rewards, and given your organization's design, strengths and weaknesses.

Promise number two further illustrates the criteria needed for CRM success.

Promise #2: Use a portfolio management matrix with quantitative performance criteria to prioritize, coordinate, consolidate and streamline CRM initiatives across different business groups within your organization. Respect the fact that different businesses have different needs, and understand what technical and business processes can be shared and/or standardized and which ones should not.

"I promise to embrace a portfolio management approach to my CRM initiatives from my various business units and/or operating groups. I will integrate and consolidate these efforts to avoid overlapping, duplicative and contradictory technology development efforts. Moreover, I promise to evaluate these initiatives on the basis on solid, short-term as well as longer-term performance metrics, and will assign the highest priority to those initiatives that offer the great economic benefits, relative to cost and ease of implementation"

At most large, multidivisional corporations, the problem is not that there is no CRM strategy. The problem is that there are dozens of CRM strategies and initiatives, many of which are duplicative and/or overlap each other.

Some run contradictory to the organization's IT strategy and architecture. For example, while the IT division of an organization is committed to open standards and Internet-based technology to ease integration and global deployment as well as lower maintenance costs, business groups will go ahead and buy a CRM package which is based on a proprietary data model and business objects.

The good news is that many organizations recognize this problem. The bad news is how they often "solve it." One way is the low-tech "workshop" approach, while egos, tribal instincts and corporate pecking orders prevail at establishing priorities — what initiatives get funded and how they are rolled out.

A more high tech method involves a corporate-wide effort to gather all the business requirements and cram them into a single, enterprise-wide solution framework. This forces different operating groups to adhere to the business process design and workflows of the software application. The bad news is that, in many cases, different operating groups have very different ways of conducting business (some for good reasons, some for not so good reasons).

A common result is the famous "user adoption" problem — people simply don't use the system, or use only a small sub-set of features (for example, using a full-featured CRM system as a ridiculously expensive contact management system). Another bad result is that different business users customize the package so much that the company winds up with the worst of both worlds: an expensive, upfront investment for a fully-supported commercial package with all the higher long-term maintenance, integration, upgrade and support costs of a custom application.

What's the better way? Use a performance matrix to measure expected return, relative to investment required. Those initiatives in the quadrant representing the highest return for the lower investment and risk win.

For expected return, use solid, quantitative performance goals — and no, I don't just mean return on investment (ROI), which is often a lousy short-term performance metric — to serve as the criteria for expected economic benefit, relative to the estimated cost and/or ease of integration and implementation.

In this scheme, commitment and accountability to making specific, measurable performance improvements in business processes (lower servicing costs, reduced inbound customer call waiting, higher hit rates and/or conversion ratios, higher average revenue per target account, etc) establishes the criteria to which projects are judged, and not corporate rank, ego or who shouts the loudest at the senior staff meeting.

For investment required, use realistic, well-founded estimates on not just software licensing fees but also the expected costs of integrating and implementing the package — including change management, training and communications expenses.

In my next, third and final installment, we'll cover pledge point three.

Do you agree with me so far? Don't agree? Got an interesting insight, opinion or real-world example to share? What are your thoughts? Please write me at Arthur.oconnor@reuters.com.

Arthur O'Connor is one of the nation's leading experts on customer relationship management (CRM) and customer-facing IT systems and strategies. He's currently the national columnist for eCRMGuide.com and this year serves as the chairperson of the Institute for International Research's CRM Conference. Arthur has over 20 years leadership and management experience in the area of customer management, strategy and new business development, including 15 years as a senior corporate officer of two NYSE-listed inter national corporations, and over five years experience as an independent management consultant and Big 5 firm practice manager selling and managing large-scale IT engagements.

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