Companies should take "a surgical view" of their investments in Customer Relationship Management (CRM) based on carefully defined risks and rewards, according to AMR Research analyst Laura Preslan.
Recognizing there are hundreds of technology investments that can be made in CRM, the analyst firm provides a risk-reward framework to help companies prioritize based on business value.
Technology investments are divided into four groups: Foundation, Advantage, Tactics, and Compliance. 
Foundation (high reward, low risk). According to AMR, these are "core applications that every company should use for great benefits at low risk. These investments typically do not cost buyers a great deal of money to initiate nor do they have high penalties for failure. In CRM, Web self-service is the best investment across all customer management areas based on the risk-reward equation....AMR Research surveys show that only 47% of companies have invested in Web self-service to date. However, the majority of those companies have launched basic Websites rather than implementing integrated knowledge management, natural language processing search abilities, and strategies to deflect calls into Web self service. This has reduced the reward of the investment."
Advantage (high reward, high risk). These are applications that "can deliver a competitive advantage and great market distinction. They carry great risk for failure, however, and must be carefully considered and executed." As AMR sees it, "price management falls into this category. Price management is the end-to-end process of optimization, execution, and enforcement of prices...Even though every company can benefit from improvements in price management, only those companies with a high risk tolerance should invest in price optimization and price enforcement today. Companies that are ready to tackle the business process issues that lie at the heart of price management problems reap significant top-line and bottom-line improvements."
Tactics (low reward, low risk). These are applications that "can be executed fairly easily and inexpensively. They are not essential to a business, but represent the type of functionality to deliver operational blocking and tackling....In CRM, a customer knowledgebase is a good example of such a technology. A customer knowledgebase is a database that stores information about customers and the products that they have purchased. It is typically a stand-alone database for one product line or division and is not integrated with other customer data sources. A customer knowledgebase is often confused with Customer Data Management (CDM). CDM is an enterprise-wide strategy for storing, cleansing, updating, and using customer and prospect data. It is much more difficult to achieve and more expensive to implement (high risk, high reward) than a customer knowledgebase, but without it, companies lack a unified view of customers."
Compliance (low reward, high risk). These are applications that "must be executed because of government, customer, or supplier demands. Their nature, cost, and complexity make them high risk...Traditional Sales Force Automation (SFA) implementations are high risk, low reward. With an average implementation price tag of more than $5M for a $1B company, most of the 56% of companies that have implemented traditional SFA have not seen a Return on Investment (ROI) in their implementations because of lack of user adoption, cumbersome interfaces, and lack of integration with other systems. These projects can still be saved, but new investments should focus on ease of use rather than fully-featured functionality. ...Companies that invest in products like those from salesforce.com are finding that less is more with SFA (note that hosted SFA is shown as low risk, moderate reward). Processes for tracking and understanding pipeline activity are important, but ease of use and flexibility of customization outweigh the intended benefits of complicated functionality."
As AMR concludes, companies "should look at each category of CRM technology to identify surgical opportunities that are low to moderate risk, high reward investments... While many companies have already invested in the application categories described above, the investments are not delivering maximum value. Explore opportunities to increase the reward for application categories for which you have already absorbed the risk."
January 23, 2005
Posted by Britton
Kamran Kashani, a professor of Marketing and Global Strategy at Switzerland's IMD business School, offers a few key imperatives to guide companies as they develop their customer initiatives. Among them:
Grasp the Moment: A break with the past is never easy, but it's a lot easier when standing on a burning platform. In many customer-focused turnarounds, the management began the journey facing an impending crisis, one that forced the organization to search for novel ways of serving its customers. IBM's combined $13 billion loss in 1992-93, the largest in its long history, was a compelling signal that a clean break from its insular ways was overdue. The new management exploited this organization-wide realization to push through a new vision that tied the success of the company to ways of making customers successful in their businesses. But managers need not wait until the entire house is on fire before raising the alarm. Anticipating a future crisis, they are well advised to grasp the opportunity that comes with increments of bad news to raise the sense of urgency and to prod and prepare their organization for the unavoidable change.
Organize Around Segments: The right structure can be an immense help in implementing a customer-intimate strategy. At IBM, to facilitate the acquisition of sector knowledge needed for its newly adopted solutions strategy, the management re-drew the organization chart thereby creating 12 divisions, each looking after an end-user cluster (banking; government; insurance; distribution; etc.).The new structure replaced a product-based organization that was no longer relevant or even comprehensible to its customers. The power of organizing around customer segments lies in assembling under one roof the often internally scattered customer expertise, and in crafting strategies that exploit deep insights into each segment's business.
Choose Your Customers: Getting intimate with customers is a selective process: not all potential accounts deserve or qualify for it. Put differently, the high cost to align and serve the chosen accounts must be more than compensated by the additional profit streams directly attributed to such undertaking. That criterion alone suggests that the current volumes of business are probably less important in targeting customers than their future profitability. Other factors to consider include a fit between the company's strategic ambitions and those of the customer, a readiness to invest in joint programs for shared benefits, and more than a minimum level of mutual trust between the two management teams.
Follow Through: If a single variable could explain the difference between success and failure in customer intimacy, that variable would be the qualities of top management's leadership in follow through. It's the top management that defines the logic and sets the agenda for a customer-focused strategy. It's also those at the helm who have to shape and steer the organization in the unchartered waters as gaps between ambitions and reality become evermore apparent. In deciding to refocus the strategic agenda, they have embarked on a major change program that would continue to require their active involvement with the entire process over a good stretch of time.
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January 10, 2005
Posted by Britton
As I have written in the past, my favorite television show is 24. Well, the new season has started and it is off to a pretty compelling start. What I like about this show -- and why it is relevant to this blog -- is its intelligent portrayal of intelligence in action. 
More specifically, the show -- which stars Kiefer Sutherland as agent Jack Bauer -- gives us an absorbing look at the linkage between a "command center" (like the show's Counter Terrorist Unit) and "field agents" that is analogous to many activities that are becoming increasingly critical in the business world.
Just think of CTU as a very intelligent customer contact center or sales support operation. The field agents are like field sales people or professional consultants. Success, as I see it, will increasingly revolve around the interplay of such forces in the coming years.
What I found interesting in the first episode of the series was a scene where an an agent turns on his hidden camera-phone to enable situation analysis back at CTU. I am expecting such behavior to become ever more common in the years ahead as sales people turn on their (unhidden) cameras so that a sales operations expert can monitor and, in some cases, participate in sales meetings. (We already do this with audio conferencing.)
The electronic linkage -- and digital capture -- of the event makes it easier for us to learn from activities in the field -- even course correct in real-time. Imagine an inexperienced field sales person uttering something inappropriate that upsets the prospective client; the experienced sales ops manager back at the office can step in at that moment and turn the situation around. Later on, the sales person can play back the digital "tape" and learn. Learning is accelerated. Performance improves.
That's kind of what is going on in 24. If you watch the show, take the time to think about the interactions between the command center (which is peopled with super smart analysts as well as some out-of-touch bureaucrats) and the field (where agents must act in the moment -- hopefully with the support and analysis of CTU).
As our enterprises become more and more real-time in their demands and behavior, we too must act quickly -- and with great precision. Every client contact becomes a threat and an opportunity. This is what customer-focused analysis and action will look like in the future. Just ask Jack.
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