Putting Strategy Back Into CRM Strategy
by Joe Morrow, Managing Director,
Morningstar Consulting Group, LLC

It's no secret that CRM solutions (and the high-dollar consulting engagements that often accompany their implementation) are the latest eBusiness craze, and well they should be. When you consider the number and complexity of customer interactions undertaken by virtually any modern business against the technical capabilities of today's CRM solutions, the opportunity to improve customer relationships via automation is self-evident.

So why do CRM efforts turn into over-budget, under-performing quagmires at so many companies? The answer lies in the misalignment between CRM initiatives and broader corporate vision. To address this, organizations must consider the following three areas of CRM alignment:

• The strategic foundations on which CRM is built
• The business objectives that follow from CRM/strategy alignment
• The organizational implications that follow from strategic alignment and business objectives

The Strategic Foundations of CRM

CRM is no different than any other technology that can be used to improve business performance in that it must fit in with overall business strategy, and failure to consider this alignment means trouble. We've seen this scenario played out in recent memory with ERP solutions (think back to the headlines of 3-5 years ago proclaiming hundreds of millions spent on ERP systems that failed to deliver).

There are four simple questions you can use to assess the strategic alignment of your CRM initiatives:

• What strategic objectives will CRM further? Perhaps the answer is obvious. Even if it is, you must determine exactly what objectives CRM will help you to accomplish-and assign the CRM initiative an appropriate level of importance.
• How will CRM impact these objectives? If you cannot articulate, in three sentences or less, how your proposed CRM solution will help you accomplish specific strategic goals, you must reevaluate the value of the initiative.
• What is the range of potential impact measured quantitatively? Determine the business-level metrics (customer satisfaction, unit sales, etc) you will use to measure CRM's impact on the strategic objectives articulated above. It's crucial to be so thorough here that you can quantify the return on every CRM dollar spent.
• What is the business case for various CRM investment scenarios? Once you've figured out how to measure the return on CRM investment, test various investment/return scenarios (while comprehending their associated risks) and choose the most promising.

CRM Business Objectives

Once you've aligned CRM with your overall strategy, it's time to examine the next level of detail: alignment with business-unit-specific objectives. This will provide more tactical guidance, which you can use to monitor performance in real time, post-implementation.

The relevant issues here are:

• What are the relevant customer metrics for each business unit? Determine the measures specific to each business unit's offerings that may be impacted by CRM. For example, an IT services firm targeting agricultural supply stores sells hardware and software products, and provides services to install and support these products. On the hardware/software side, CRM's success may be correlated to cross-sell and up-sell of additional products. On the service side, it may be correlated to the time it takes to close a problem ticket.
• What are the targets? This requires knowing the current (pre-CRM) performance, which may require putting in place new measurement mechanisms. Once this baseline is set, determine the improvement required to make a meaningful contribution toward your CRM investment, and you will have a target.
• Conduct this analysis for each product, business unit, and customer segment: This is the easiest and hardest part of implementing CRM. Once your measures and targets are set, your CRM solution should provide you with automated reports on its performance against them. That's the easy part. The hard part is putting in place the processes to continuously monitor these reports and make any changes necessary to address shortcomings in the system. Also, don't forget to identify and evaluate overperformance; it may offer insights into how further gains can be realized, and opportunities to recognize top-performing groups.
• Validate against strategic foundation: Once your CRM solution is up and running, periodically evaluate its contribution to the original strategic objectives. If the initiative is performing well on isolated business objectives but not fulfilling its strategic intent, it may offer important learnings for your corporate strategy.

Organizational Implications

This is the final area of CRM alignment. Like other major historic technology solutions, CRM has inescapable organizational impacts that are best address proactively.

The organizational questions to ask are:

• Who is the Senior Executive responsible for Customer Relations? Yes, it's an inescapable fact: without an Executive Champion, CRM initiatives face difficult odds. The Executive Champion must understand the value of CRM (demonstrated through the business case developed as part of the Strategic Foundation) as well as the incentive that this value implies for various organizational stakeholders to support the initiative. Based on this understanding, the Champion must provide incentives (or directives) that promote cooperation in order to ensure the initiative's success.
• What behavioral changes are required to meet customer expectations? Bolting a CRM solution into place is one thing; addressing the customer expectations it creates is quite another. Ensure a proper mix of training and incentive to ensure that your employees use the full potential of the CRM system, and interact with customers in a way that both leverages and promotes its potential.
• How is data going to be shared with various business units/staff? Perhaps the Achilles' heal of CRM systems lies in the privacy concerns they can create. You must ensure that business units and staff get the information that will allow them to realize the CRM solution's value while maintaining appropriate control over information privacy; failure to do so will alienate customers and may soil your organization's reputation.
• How will CRM information influence behaviors, tactics, and programs? Each component of the organization must determine this for itself, and herein lies the little-recognized potential of CRM: once the customer communication channels are established and a critical mass of data is accessible, new value will emerge. It is crucial to ensure that the organizational channels exist to allow such discoveries to feed back into the business strategy and objectives that created this opportunity in the first place.

It's all about the value

In business, technology fads are ultimately differentiated from meaningful tools by the value they create, as measured on the bottom line. Valuable tools can run the gamut from the seemingly insipid (VisiCalc, the first spreadsheet, for example, changed the financial services industry in the mid-1980s) to the overblown (many companies are still wondering what their $200 million ERP investment bought them). There is no doubt that CRM has great potential that is sorely needed in our world of complex and frequent customer interactions. The organizations that realize this potential will be the ones that put CRM where it belongs: in their corporate strategy.