Technology

Back to the Drawing Board

With CRM installations, practice makes perfect.
Russ BanhamNovember 1, 2002

As W.C. fields once said, “If at first you don’t succeed, try, try, and try again. Then give up. There’s no use being a damn fool about it.”

Companies that have rolled out customer relationship management software know what Fields was talking about. It’s ironic, too, since the concept of CRM software is simple: treat customers well and you’ll always have customers.

There’s only one problem with that concept — in reality, getting a CRM system right the first time is anything but a sure thing.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The list of companies that have implemented CRM systems during the past few years is a long one. But many of those systems are now gathering dust — software converted to shelfware — as employees look for simpler ways to do their jobs.

To be fair, CRM rollouts tend to be ambitious projects. Unlike other business programs, customer-care software must often work across several channels, including Web sites, call centers, and retail outlets. Even makers of more-robust, mature applications like enterprise resource systems have trouble getting their apps to work in several environments.

Deploying a CRM app the first time often leaves a lasting impression on the deployers. Take the case of travel site ByeByeNow.com, which spent $8 million in 2000 on a well-intentioned CRM project that was meant to meet the needs of travel agents and consumers. Since ByeByeNow.com didn’t want to compete against its travel agents, the E-tailer built a customer-service infrastructure that allowed consumers to make purchases in several ways: they could buy from the company’s Web site, a 24-hour call center, or one of its bricks-and-mortar travel-agency franchises.

“It was a lofty goal,” concedes Wendy Close, research director at technology consultancy Gartner, who has studied the BBN rollout at some length. The return on ByeByeNow.com’s $8 million investment? Roughly one-third of the company’s 250 franchise travel agents used the CRM system. Says Close: “Other agents resisted the change.”

To fix the problem, BBN would have had to say bye-bye to more cash. But apparently its venture-capital backers balked at throwing good money after bad. “BBN was forced to shut down its call center,” notes Close, “and put the agency franchises on the block.”

Hardly a happy ending. But BBN is not alone. Monster.com, the online job-listings company, reportedly spent $1 million in 1998 on a CRM solution to increase sales-force efficiency by providing “immediate” access to information on potential customers.

“Immediate” was a bit optimistic — the system was reputed to be so sluggish that field personnel couldn’t download data on their laptops. This monstrous dilemma compelled the company to rebuild its entire CRM system from scratch, at a cost of a few million dollars more.

Ask Sales First

In fact, when it comes to CRM applications, it appears that many corporate managers are inclined to keep trying until they get it right. BMC Software Inc., for instance, launched two CRM initiatives that fizzled before finding its speed with a third.

“The first two projects were heavily driven by IT,” concedes Jay Gardner, vice president and CIO at the Houston-based enterprise systems management company. “They turned out to be purchases of technology for technology’s sake.”

While the CRM software was made available to the sales force, Gardner says only 30 percent used the stuff. “It became clear that the rest wouldn’t touch it unless there was a decisive and strong move on the part of management to require it, and high-level leadership from sales to carry the ball,” recalls Gardner. “That was the turning point.”

BMC learned the hard way — twice — how to implement a CRM strategy. “The previous efforts had very little involvement from sales management or sales professionals,” says Joe Galvin, a Gartner vice president and CRM research director. “With two failed initiatives and skepticism running high, the likelihood of success for a third attempt seemed pretty remote.” Galvin says the buy-in from senior officers, along with improved project management, made the difference. “The third time proved the charm,” he notes.

Getting sales in front of the CRM project was also critical to the success of the third endeavor, says BMC’s Gardner. “I was at a conference recently,” he recalls, “when someone in the audience said, ‘What if I can’t get my sales executives involved?’ I told him to save his money then.”

Every Metric Tells a Story

Indeed, experienced CRM deployers point out that employees won’t use CRM apps unless they feel the software will help them get their jobs done. “And they won’t feel that,” explains Gardner, “unless they’re involved in the project.”

Managers at BMC also discovered that it’s crucial to change business processes before introducing enabling technology. “We reengineered most of the sales processes and many of the marketing processes prior to relaunching the CRM project,” says Mark Meyer, the company’s director of CRM.

One example: BMC completely redesigned its sales-lead management process before relaunching its CRM system. Previously, the company didn’t have a good way to bring all the leads into one place in order to funnel them out to the employer that owned the account. “By getting sales involved from the get-go,” says Meyer, “we were able to gear technology to their needs.”

Altogether, BMC involved 175 account managers, customer support staff, and other sales operations people in the third CRM redesign. Why the parade? The company’s management wanted to “make sure processes fit what these individuals needed from the system,” explains Gardner.

The business processes were designed around sales roles and their key needs. In fact, Meyer, the CRM guru, actually came from the sales side of BMC. During the third try at deploying a CRM system, he headed a cross-functional team dedicated to making sure the rollout was successful. That group included the director of finance, the director of customer support, and several sales and IT executives.

Gardner, as CIO, was held accountable for delivering a return on the project. “Fortunately, we’d learned quite a bit the last two times about how to set up meaningful metrics that would match CRM to our business objectives,” he says. “We have many ways to help measure ROI, including cost per customer-service call, cost per customer sales lead, and productivity of account managers by geography.”

So far, those metrics are telling a different tale than they did the first two times BMC tried deploying a CRM system. For example, it now costs the company $125 to process a customer order, compared with $800 a year ago. And sales reps are saving two hours a week on average (a 7 percent improvement) getting hold of customers by phone. “Sales reps tell me the time they used to spend putting together sales forecasts they now spend on strategies for how to make that forecast a reality,” says Gardner.

Perhaps the most telling metric, however, is the CRM take-up rate: nearly 100 percent.

Wait State

Dow Chemical Co. is another company that invested millions of dollars in a CRM initiative that didn’t gel for several years. Management at the Midland, Michigan-based specialty and commodities chemical provider plunked down a couple of million dollars to buy Siebel CRM software licenses in 1995 — knowing full well years would pass before it would completely implement the technology. Explains Mack Murrell, Dow global director of customer interface, “Our IT strategy is to buy early, then wait.”

In the case of its CRM initiative, Dow management held off implementing the software companywide for nearly four years. Executives at the $27 billion (in revenue) company spent that time making sure business-process changes were in place. “Companies often think CRM is just technology,” notes Murrell. “But it is people, processes, and technology — in that order.”

Close from Gartner says Dow’s strategy is interesting. “They bought all this CRM software cheap because it was new,” she adds. “It would cost other companies twice as much to replicate what they did.”

In 1999, Dow finally rolled out its “Customer Interface Initiative” CRM strategy. That strategy calls for measuring customer interface costs and activities per contact channel across its global enterprise, a procedure that Close says is overlooked by more than 85 percent of organizations. “They basically want to become the easiest supplier in the world to do business with,” she notes. “They’re still on that journey.”

Indeed, Murrell says 2,000, or about 70 percent, of Dow’s customer-facing employees are hooked into the CRM system, though the goal is all of the sales force by 2003. “We’re up and running, with the solution implemented in all our call centers, inside sales, and in customer service,” he explains. “The thing we’re working on now is reengineering the entire order-management process.” And, he adds, “once that is done, we can glue all of this together.”

The gluing will probably take some time, too.

Russ Banham is a contributing editor at CFO.

The Deployment Trap

Spending shareholder money on a customer relationship management (CRM) system in the fervent hope that it will generate indisputable and invaluable information about customers is akin to corporate roulette: place your bet and hope for the best. How else can you characterize an IT investment that costs millions of dollars, yet is likely to fail at 60 percent of the companies that implement it? Not that this sobering news (courtesy of technology consultancy Gartner) is in any way curbing the corporate appetite for CRM.

The numbers back this up. Three out of every four U.S. corporations are currently implementing CRM applications, and spending a lot of cash to do so. In 2001, businesses forked out $26 billion on CRM deployments ($22 billion for consulting fees and hardware and software maintenance, and $4 billion for software licenses). And don’t forget: those numbers do not include the funds needed to run the applications or install communications infrastructure. This raises the obvious question: Is CRM more trouble than it’s worth?

“A lot of it is,” concedes Gartner research director Wendy Close. “It’s your basic hype cycle. Right now, CRM is at the peak of inflated expectations. Many Type A companies put big dollars into it during the previous period of rising expectations, and they will eventually encounter the trough of disillusionment — where we’re headed.”

That trough is getting wider, too. Close now expects the current 60 percent CRM project failure rate to jump to 75 percent next year.

The failures have many fathers. Some companies run out of money for expensive CRM modifications. Others fail to change underlying business processes before implementing the technology — a mistake in any IT deployment. Indeed, consultants say many corporate CRM adopters forget basic business concepts when rolling out the customer-facing apps. “They forget about the other elements involved, the change-management strategies affecting people and processes, the need for training, user buy-in, and collaboration,” explains Close. “And they introduce CRM initiatives piecemeal.”

By Close’s reckoning, only 8 percent of companies that have implemented CRM have what she calls “true enterprise CRM” — a system that resides across many desktops and produces diverse reports on customer trends, buying patterns, and loyalty issues. “CRM demands some fairly wrenching cultural changes,” says Stephen Shaw, vice president of CRM strategy at Go Direct, a Vancouver consulting firm. He attributes CRM disappointments to corporate failures to make the required organizational and process changes.

Joe Galvin, a Gartner vice president and CRM research director, says you have to get sales staff involved before IT is brought into the discussion. “The CRM technology won’t meet the needs of the field organization unless the field organization is deeply involved in the first place,” he explains. He says it’s crucial that the users of the technology drive the development of the technology.

When CRM projects fail to live up to expectations — or aren’t completed on time or within budget — fingers start pointing. IT blames sales, sales blames IT, and everyone wonders why the CFO wrote this huge check in the first place. “The CFO is the person who must say, ‘Prove to me that this project will achieve a specific rate of return, or I won’t fund it,’” says Close. —R.B.

Back on the Horse

A failed CRM implementation doesn’t have to be the end of the world. Gartner recommends following an eight-step program before trying again:

1) Figure out what went wrong, but don’t lay blame.

2) Study the customer experience from the customer’s point of view (the normal interaction between a customer and the enterprise).

3) Find the real “pain points,” the internal processes that really need overhauling, and gauge them by asking employees.

4) Reset expectations, because no CRM project will ever reach the level of overstated expectations broadcast by the media, like a “tripling in direct-mail response rates.”

5) Simplify the project by making it easier to manage and control — and don’t let it grow too fast too soon.

6) Gather metrics from the failed CRM initiative to apply to the next generation of the project.

7) Check the data: CRM is a data-based strategy, so it will be only as good as the customer data that supports it.

8) Avoid shortcuts by ensuring that this time around, the project plan details well-thought-out processes governing vendor selection, training, the timetable of deliverables, and so on, and make sure all stakeholders — including, yes, the customers themselves — are involved at all stages. After all, CRM is about them. —R.B.