The Last Sustainable Competitive Edge: An Interview with Jim Dickie
Q: How many Fortune 4000 companies do you believe are actually implementing
CRM software solutions?
A:
We have just completed a survey of 226 companies. We went out trying to get
a feel for the types of problems typical companies are experiencing. What are
they doing about those problems? What role does technology play? Some companies
are solving their problems with people, some with process, and others with technology.
We asked, "Have you taken a real look at technology? Have you done an evaluation of things you could do? That number showed that not everyone is jumping on the technology bandwagon - just 62% of the companies we surveyed said they'd done a formal evaluation of CRM. Of that number, 66% said they saw enough value to actually purchase a CRM application. Of those who did invest in CRM, 24% said they were achieving significant operational performance improvements due to the new application; 52% said they saw minor improvements; 25% said they saw no discernible improvement at all. So if you aggregate those statistics, it shows that only about 10% of the Fortune 4000 are achieving the goals they set out to with their sales and marketing excellence initiatives.
Q: Why are these numbers so low?
A: I think the fundamental reason is that companies are looking at technology first and then examining how the organization actually works. A smarter approach would be to look at their process first - and then review which technologies might be most appropriate. That's a fundamental flaw in their thinking.
Right now there is a plethora of CRM tools out there. There are tools to help every single step in the CRM cycle, from initial territory analysis tools to prospecting tools to interest development tools to generate leads, to leads analysis tools, presentation, configuration, order generation, fulfillment customer service - there is a ton of stuff out there. The biggest issue right now, in all too many cases, is that a company will go out and get an opportunity manager simply to see what problems it will solve. A better way to go would be to sit down with marketing and ask, "Why can't we double the number of high quality leads we generate." In sales, "Why can't we double everybody's quota?" In support, "Why can't we double the number of calls we handle with the same number of people?" The initial reaction you will normally get if you asked those questions, is your staff will tell that if they tried to do any of the above based on the way things are today, they would quit! Why would they quit? Because they simply couldn't do it. Why couldn't they do it? You need to get down to the specific barriers that are impacting their performance and then go see how CRM tools could reduce or eliminate those barriers.
When I look back at all the best projects we have benchmarked over the last five years, very few of them talk about their initiative using CRM terms. They always use business terms. For example, Pitney Bowes significantly reduced its order error problem; GE xChange Services significantly increased the number leads it generated; General Medical had a huge increase in its new product introduction close rates, and there are many other examples. These companies see technology as nothing more than adding a device to get rid of the operational errors that occur in the sales process.
The key difference is that those project teams can tell you exactly what problem they're trying to solve. Then they're able to sit down with the CRM vendors and say, "Can you help me solve this specific problem?" It's funny to think that many companies are implementing CRM solely because everyone else is doing it. The problem is that everyone has different problems. The missing link here is sitting down with the people who are involved in your sales process, and saying, "Let's take a look at this process and find out where the flaws are."
Q: How have successful CRM implementations changed the way companies sell to the customer?
A: Going forward, we need to quit talking about making the customer a partner and actually do something about it. It's often just lip service. Of course we want to form partnerships, but at the first sign of a bad quarter, we try to slam product. If you truly understand your customers' processes, then you can determine your own role in fixing that. What knowledge do I have that I can share with them out of my CRM system? That's one of the reasons why Cisco's Intranet project has been so successful; they're doing 80-85% of their revenue through their Intranet-based CRM system. Channel partners and customers have access to it; it's a great way to share information. It's important to know what channel partners want to see, what customers need to see, and making those tools and information available to them. As a Cisco customer, I've got my own ID, I can sign on to the site, and I can configure my own orders. I can do my own "what if" analysis; I can actually send it around my company; I can submit it to Cisco; I can issue expedite requests and change requests. I am much more empowered due to this CRM technology. And an appropriate sales rep will oversee the account; if we're changing an order, an account manager is notified.
This is critical because process is the last sustainable competitive edge. In the 1970s, back when I started my sales career at IBM, product life cycles for mainframe were five or six years. The product life cycle for a PC models is now close to five to six weeks. No one has a competitive product edge, because competitors can easily catch up. Quality is a given - your product better be high quality. Service is a given - customers expect nothing less than great service. And price is a short-term tactical answer. So what's left? The answer is "process." I focus on understanding and optimizing the way that I work with my customers, not just what I sell to them but how I sell to them. Companies that successfully empower their channel partners and customers - and leverage technology - will have their competition eating dust trying to catch up.
Q: Which new tools show the greatest promise in creating a competitive edge for companies?
A: In the more traditional areas - opportunity management, contact management, etc. - what we're seeing is a number of vertically-industry focused solutions. For example, Dendrite has done so well in the pharmaceutical industry that Siebel now has a practice that focuses solely on pharmaceutical companies. The pharmaceutical sales force has a unique set of challenges than a manufacturing rep or someone selling financial services. I think you'll be seeing situations in which we deliver things that are specifically oriented toward the way people sell in specific industries.
The second thing that I see emerging right now are sales coaching systems, or sales effectiveness systems. Opportunity management systems and contact management systems really improve my efficiency; they allow me to communicate the status of deals better, and send correspondence to customers more easily. They create time for my average sales reps to make more average calls. What I need is for my rep to make great calls. The new types of systems that are coming out are specifically designed to do the needs analysis, generate the proposal, and generate detailed data sheets that are focused differently to a CEO than to a CFO or a CIO.
The other thing that I see on the horizon is the interactive selling system, a system you can actually take on a sales call. A few years ago, several CRM vendors decided to integrate handheld devices, like a Palm Pilot or a CE-based hand computer, into their CRM offerings so that sales people would have access to contact info while on sales calls. That's just not enough. What I'd like to see is a networked computer on a sales call. Fujitsu has a box called the 3500; when you're back at the office it looks like a typical laptop, but when you go into the field you just take the screen with you. It's a full Windows PC, not just a limited function device. IBM has come out with box that is kind of like a portfolio; it has a notepad on the right, but it also has a computer screen on the left that swivels that I could use interactively with a customer. These are tools that will make us more effective.
Q: How do you see the trend in actual new CRM implementations?
A: There is still a huge CRM market. In the first quarter of 2001, our study found that the average company was spending $10,486 per user on hardware, software, customization, training, and support. The 24% of projects, those that were having the most success that I referred to earlier, were spending just over $18,000. Corporate executives often say, "That seems like an awful lot of money!" I then normally ask them, "What is it costing you to not fix your process problems?" Companies need to sit down and evaluate their business. I recently spent a day with an executive management team who was complaining that their sales force was discounting too much. So I asked, why are they discounting? They told me they were discounting because the reps didn't know how to sell value. Why don't they know how to sell value. Because they don't have access to the right information, so when a customer says the price is too high, the reps have to fall back on discounting. When we calculated what this increased discounting was costing, it was a lot more than $18,000 per rep. So, that became the focus of the CRM project, get the right information into the hands of the sales force so they can do a better job of selling value.
These are the discussions CRM vendors need to have with their clients. If they can uncover real business problems, and then show how their tools can solve them, then the rate of CRM implementations will accelerate. In they just try to slam product into accounts, CRM purchases could fall off significantly. 2001 will show definitively which way the industry is evolving.
