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The 56 Group, LLC

CRM is becoming so mainstream that the need to define it as a separate discipline mightsoon be moot.

Have you figured out what CRM is yet? If I asked you for a definition, could you give me one? How long have you been trying? In my column in CRM magazine, I defined it in a way that I think was more than passable: “CRM is a philosophy and a business strategy, supported by a system and a technology, designed to improve human interactions in a business environment.”

Memorize it – quick. Because even as I write this, CRM is morphing into something even more voluptuous and ubiquitous than I described in that still timely definition. In fact, it is becoming so omnipresent that the need for CRM as a separate discipline might be moot in five years or even sooner.

The Customer Ecosystem

Even if you don’t see it, or your company isn’t practicing it yet, we’re now living in a new business arrangement – a customer ecosystem has supplanted the corporate ecosystem that so dominated the post-World War II business matrix for so long. If you look at today’s business ecology, you see the customer at the hub of business – the subject of business – not just the object of business desire, which the customer has been for centuries. In 1995, PeopleSoft elegantly expressed an early inkling that some sort of transition of the focal point was taking place with their articulation of what they called enterprise resource optimization. They stated explicitly that the customer was now driving demand in the marketplace, not products nor the manufacturers. At the time, the solution wasn’t to devise customer strategies; the solution was to respond to the demand from the corporate side as quickly as could be done with systems and technologies to do it.

The Internet had transformed the customer from a passive purchaser of products pushed into a market by demand created by advertising firms. Product information, which had been scarce and difficult to obtain in sufficient quantities to make decent purchasing decisions, was now available rather easily through the Internet. Not only could you find several merchants from around the globe who were willing to ship products to your door, but information about those products became easily available through Internet forums where sites like Epinions became a clearinghouse for the thinking of hundreds of thousands of customers who had used tens of thousands of products. So you could easily find out what others thought about what you were considering buying. How about finding a merchant who wouldn’t cheat you on price and service? Not only could you do comparative shopping with services like Ask Jeeves, but you could go to Bizrate to see what your fellow consumers thought of the merchants that you could potentially buy the product from. Yahoo shopping provided (and provides) you with similar benefits. Knowledge was power, and it was empowering for the customers. Their volatility jumped to new explosive heights, and customer expectations went through the roof. Everything needed to be absolutely, positively right from pricing to delivery or they could and would go elsewhere with the click of a mouse.

In the mid-1990s, when all of this was taking place, CRM became a heady way of dealing with this new level of competitive management of customers who were no longer passive or reactive, but proactive and volatile. Companies like Siebel, Clarify and Vantive became the beacons for the new science and art of managing your customers’ expectations and, increasingly, your margin of possibility for grabbing part of their consumer purchasing power. CRM was a technology play back then, automating the services and some of the processes that were needed to improve primarily sales and services. The CRM technology vendors, ever mindful of not overselling their products (yeah, right), kept repeating a mantra, “It’s a system, not a technology.” This was given lip service but not adhered to at all. “Sure it is. But we know better. It’s cool technology. It automates customer stuff,” was the way CRM was sold in its infancy.

But then came the dot-com bomb and, on top of that, 9/11, and everything changed. Customers were not only empowered due to the success of the Internet as a communications medium, but they now became cautious when it came to parting with their money because of a slumping job market along with the dual threats of global terrorism and economic uncertainties.

The result? As we move through the new millennium, we have a different kind of customer: careful about how they spend but empowered; knowledgeable about what they are interested in; and knowledgeable about the resources available to find what they want. They are eminently multichannel – equally adept at phone, Internet, email, fax, face-to-face conversation and direct mail as a media for sticking it to the man, at least the one that they have an interest in purchasing something from.

The old forms of CRM that had been so successfully defined by the META Group as operational, collaborative and analytic were beginning to fray at the seams. They were useful but horizontal definitions and didn’t take into account the social consciousness and cultural changes that were necessary for CRM to succeed. They saw it as an automated technology and systems: salesforce automation; enterprise marketing automation; customer support; some analytic applications; and channel management. That did the trick back then, didn’t it?

Apparently not. All of a sudden we began seeing reports from Gartner, IDC, META Group, Forrester Research and GIGA that CRM was failing at the rate of 55 to 70 percent. Why? Lack of user adoption was a big one. Why? Because it didn’t take into account the personalized self-interest of the users themselves. Additionally, CRM was seen as a siloed application suite – different from supply chain management or enterprise resource planning. CRM was “customer-facing.” CRM was more than on the map. It was a multibilliondollar business. But the so-called failure rate (which in reality was a “didn’t get the ROI expected” rate) was vexing. But several things occurred. There were spectacular success stories from companies like Cisco, Maytag, Brother International and hundreds of others who had learned that CRM was actually more than just a system and a technology. They learned that, as I defined it in February 2003, CRM was “a philosophy and a business strategy, supported by a system and a technology, designed to improve human interactions in a business environment.” When this concept was adopted by companies in whatever form they did – when they took into account not just the supportive technology system but the process change and the culture change in addition to the strategic planning and the concerted effort toward user adoption, it worked! Dramatically well.

Then in late 2002 and into the present, there was another change in the economy that led to a change in the business ecosystem. The economy began to creakingly move, and then in a more loose-limbed fashion began to grow again. This was in conjunction with studies done by the same analyst organizations and others like CRMGuru that showed CRM’s success rate had surpassed 50 percent. The combination of the healthier economy and the uplift it caused and the success of CRM transformed the thinking in most of the business world. CRM, which had been a strategic consideration as a part of a corporate strategy became the corporate strategy. Period. Companies recognized that the customer had gained the pre-eminent role in the business hub, and thus the business model changed. The customer is not simply that individual who plies you innocently with money for goods and services, rather he is that savvy individual with whom you exchange value. That changes the definition of the customer. The paying client is no longer alone as the customer. The customer is also those parts of a collaborative inter-enterprise value chain that includes your employees, your business partners and/or channel, and your suppliers and vendors. Each of them has to be satisfied to maintain the links in the collaborative chain that will ultimately net you your business return.

If you look at Figure 1, you will see the “soon to be the present” of CRM as an ongoing, all-encompassing strategic consideration, not just a technology and system.

Figure 1 points out something very cogent to the change in CRM. That customer demands are now in real time and that these demands are increasingly personal. The customer is interested in having offers made to him or her, the individual, not them, the customer segment. Also, because of the abundance of choices both in product and in vendor and the commoditization of many of the products that the customer may be interested in, not only do the choices have to be in real time, but often the product itself is a giveaway for what are now being called on-demand services.

For example, if you look at Bizrate, it operates as a portal to hundreds of retailers for consumers to purchase goods. Each of the retailers is rated. Yahoo is a news portal that will provide you with news in any way on any subject. Salesforce.com created what Denis Pombriant, president of Beagle Research, called a “disruptive innovation.” It provides CRM services for a monthly subscription fee and virtually eliminates implementation overhead, and it wants to be your application provider service (not just your ASP) – the place you start out every day to go do your business – wherever you are and with whatever device you have handy, whether a desktop, an IPAQ, a Blackberry, a laptop or a cell phone. So CRM is becoming the strategy for that omnipresence.

There is now a services-oriented business model that is based on a collaborative business strategy that links partners, suppliers and brand holder, because it takes a village to meet the needs of that hungry end client. It is no coincidence that one-time bitter rivals Microsoft and Oracle are partnering to provide valuable services to customers, as are Microsoft and Sun. My, my, hasn’t the world changed.

But what also is characterizing the transition of CRM is the breakdown of the barriers between supply chain, back office functions and customer-facing functions. Everything is becoming a customer issue. For example, if you are implementing a traditional CRM solution such as salesforce automation, you now have to be concerned about the success of that solution. Are your inventory, delivery and logistics departments ready to handle an upsurge in sales if the SFA applications and strategies are successful? If not, your business could die from its success as back orders and poor delivery begin to eat into the sales success your SFA helped to create.

This is hardly news to many companies or even to the public sector. The Defense Logistics Agency in the United States, the $32 billion behemoth responsible for supplying everything from milk to weapons to all our military, is signing thousands of contracts per day with either private sector companies or other government agencies. This is a massive supply chain, and you would think that their priority is the supply chain, since lives in Iraq or Afghanistan depend on their success. Well, it is their priority, but they see the new ecosystem we live in means that the partners and suppliers they deal with and their soldiercustomers are all customers – and they allocated $70 million for a CRM program that involves the supply chain and massive cultural change within the DLA and among its partners.

In the private sector, there is an increasing awareness that the success of this effort depends on the collaboration of the users – whether the users are internal to the company or external partners. In fact, ChannelWave, a premier provider of collaborative CRM, also known as partner relationship management, calls the operation that is necessary to sustain the real-time customer demands support chain management. Rightfully so.

But these changes are also hitting the customer at the micro-level. There is an increasing proliferation of desire among CRM vendors, consulting firms and integrators to provide a differentiated customer treatment. Each customer should be “known” through the capture of more complex and sophisticated customer data, and each customer experience should be personalized. Companies like E.piphany have active, real-time analytics engines that they provide with their applications that can not only call up a specific customer record but can also capture actual customer activity on the Web or via other media so that offers to that customer can be developed and personalized on the spot, using analytics engines that are telling you why you must have that Kansas City Monarchs baseball cap at 15 percent off, that will be good for only this session. The Amazon.com Gold Box is a great example of an offer optimization engine – though one that went wild. I have yet to buy a thing from it, but I get the spirit.

But there is another side to this all-encompassing presence. Anytime means all the time, and that is just a matter of analytics and automation, so to speak. But what about anywhere? Mobility, my friends, mobility.

CRM is not quite device-independent, but it is trying to achieve that state. All the vendors that you can think of have versions of their applications that are good for the Web via laptop or desktop, good for a PDA or other wireless device and good for an offline version that allows laptop synchronization where you can’t get online all the time. This is not easy when you’re dealing with disparate systems that have to communicate with each other. For example, if you are an insurance claims adjuster and you are at a site taking care of a claim, you might have a PDA that has the claims form and the ability to attach a digital photo of the claim. But if you’re in a rural area, you might not have continuous online capability. If you are urban the next day, you might. You might have to fill out the claim form and then transmit it to a claims management system that accesses a database that determines the value and payout of the claim, which is then modified due to the customer history of the claimant who then has to pay a larger premium because of the claim. Within a short while, you can give him the payout and the new premium cost. But how many systems did you have to access from financial systems and large databases to a legacy claims management system and the communications needed for the PDA in either rural or urban areas? Wow. Complicated.

But the new architectures that are helping to make this ubiquity real are the service-oriented architectures (SOAs) that use Web services as a common lingo that allows the different systems to speak to each other. Not easily, yet. But the SOAs – the architecture using XML and SOAP and various interfaces to facilitate the interchange of systems – are the au courant CRM (and ERP and SCM) architectures of both choice and future.

So what do you have? You have a CRM that is strategic, that is available to any device and can communicate among customer, supplier, partner and employee systems and link their processes so that the end client is served well. This is driving a new customer ecosystem’s business model that is tying together all customer requirements and needs in real time so that customer value given is also customer value received. In other words, you have CRM becoming mainstream and simply the way that business is being done. So goodbye CRM as we know it, and hello customer strategy as it is now becoming.