The Rise and Fall of CRM, Part 2

Arthur O'Connor

Updated · May 08, 2002

Photo Arthur O'Connor

This three-part column is about the birth and death of the CRM fad. In part one, we looked at the Internet craze, which in some ways helped spur demand for multi-channel CRM software.

In this, the second installment, we'll examine the early CRM hype surrounding. In the third and final column, we'll discuss examples of a new generation of more practical, clear-headed approaches to CRM.

Easier to Buy Than To Do
As building more roads and highways increases (not reduces) traffic. The widespread use of the Internet in the mid-90's created more interaction among consumers and businesses, spawning new opportunities for businesses to win over or to alienate customers and prospects.

The concept was: if companies could achieve an integrated view of their customers across channels, product lines and business units, they could develop deeper and longer-lasting relationships by better understanding and serving their needs.

CRM proved a lot easier to buy than actually do. Many commission-driven software sales reps were too eager to push immediate benefits of implementing CRM packages (Increase sales! Increase loyalty! Increase sales productivity!). Many corporate types were too eager to believe that implementing a software package could readily achieve what was otherwise an extremely painful and difficult process: to please and delight increasingly demanding customers. It all sounded too good to be true. And it was.

People got wrapped up in the concept and the technology (I remember a lecture about the monumental difference between customer relationship management and customer-managed relationships) and not enough about what CRM really was: competing more effectively and generating superior financial performance by better identifying and serving customer needs.

Inherent Problems
Problems with nifty new software solutions were, as we now know, manifold. First, the new enterprise solution (like every new enterprise package before it) required businesses to re-create data from disparate data stores into a new, common (but often proprietary) data store. In many cases, the quality of client data was so poor that aggregating the information simply magnified data management problems.

Despite complex technical challenges, cultural and organizational issues doomed many CRM software implementations to failure (these same issues, ironically, were the demise of so many earlier enterprise packages, like ERP and SFA).

Most organizations weren't organized around the customer, so business processes didn't fit the simplistic and uniform workflows embedded in commercial software packages.

In some cases, CRM packages were overly customized to fit current processes (sometimes without bothering to learn or considering adopting the processes of the package). This had two bad consequences. The first was processes were automated without being improved (the old phrase, “paving goat paths” comes to mind) which meant the benefits were limited. The second effect was driving up costs.

Overly customized commercial packages gave corporate clients the worst of both worlds: the high initial price of a commercial package paired with the long-term costs and headaches of maintaining and upgrading a custom-built solution.

The Missing Ingredient: ROI
The real death knell of the CRM fad was lack of demonstrable ROI. Most organizations couldn't demonstrate measurable improvements in financial performance because they never developed metrics or processes to measure performance in the first place.

The measure became anecdotal: Did CRM live up to its hype and expectations? The answer, unsurprisingly, was no.

Many organizations that embarked on global, enterprise-wide CRM implementations discovered to their horror that providing employees a global view of customer account information didn't generate any competitive advantage or economic benefit. Business, like politics, turned out to be local.

Moreover, without an effective strategy to integrate transactional, financial and other performance data and then make use of this knowledge to attract, transact, fulfill and retain the highest value customers and the most promising prospects, CRM applications were limited to sharing customer data across different front-office systems. Sharing data across customer-facing processes is not a bad thing, but hardly represents a competitive advantage.

Like the dot-com boom, CRM hype didn't prove itself in the reality of how customers actually behave. In the third part of this three-part series, we'll look at two examples of a new generation of CRM strategies.

Do you agree? Don't agree? Got an interesting insight, opinion or real-world example to share? What are your thoughts? Please write me at [email protected]. Stay turned for part three!

Arthur O'Connor is a director and heads the CRM Integration Practice at
Reuters Consulting, a unit of Reuters, PLC. As one of the nation's
leading experts on CRM and business intelligence solutions, he writes on
business and technology trends for, as well as on CRM
strategy for He is a frequent speaker at industry
conferences. Last year served as chairperson of the Institute for
International Research's CRM Project Management Conference.

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