Transforming the Business with CRM at the Core
Introduction
According to Gartner Group research, 50 percent of customer relationship management initiatives fail from a lack of strategic focus. As a relative latecomer to an enterprise resource planning solution, Canada Post Corporation, a Gartner CRM 2002 award winner, implemented ERP with the goal of a fully integrated business solution with CRM at the core. The system implementation was not only successful but produced an estimated ROI of at least 26 percent, according to an external study.
With revenues of Can $5.9 billion in fiscal 2000 and 2001, Canada Post is Canada's national postal services provider. Canada Post delivers 37 million pieces of mail each day to more than 31 million Canadians at 13 million addresses and nearly 1 million Canadian businesses. Incorporated in 1981, Canada Post is the largest retail network in Canada, with more than 66,000 people and 7,000 postal outlets, and has been a trusted presence in communities across Canada for more than 150 years.
By the late-1990s, Canada Post was clearly at a significant crossroad. It had come through a government mandate review that described its business as a "sunset industry." The corporation recognized that its future rests on the ability to take advantage of emerging e-business opportunities. It had already embarked on several aggressive moves into e-business, but had come to the realization that for long-term success in these new areas, new processes, a more agile organizational structure, and a new technology platform were all required.
This recognition was driven home as the corporation turned to Y2K readiness. The Y2K system analysis was an eye opener; legacy systems were numerous, fragmented, and overly customized. Clearly what was needed was a long-term solution. Time was not on its side, however, so the company chose to make the Y2K transition first and then turned its attention to ERP implementation. Nonetheless, the exercise delivered executive buy-in to the concept of business transformation — a complete overhaul of processes, structure, and the technology platform.
In retrospect, that timing constraint became a significant advantage. In addition to its Y2K approach, two other strategic initiatives were being adopted concurrently by the company: the reorganization of sales to become more channel-focused and targeted at key areas and commercial customers; and the search to find an enterprise solution that would optimize CRM. These two undertakings became the heart of Canada Post's business case.
Because Canada Post's overall business is about effectively managing customer relationships, implementing world-class CRM processes and tools became the cornerstone and top corporate priority of Canada Post's mySAP.com-powered Business Transformation Program. Launched in early 2000, the program continued for another two years and was allocated a budget of close to Can $300 million on the expectation of an annual return of roughly half that figure.
Corporate Strategy
Canada Post's intention for CRM lies at the heart of the corporate vision: "Canada Post will be a world leader in providing innovative physical and electronic delivery solutions, creating value for our customers, employees, and all Canadians."
This vision, first articulated in 1998, was communicated as five corporate priorities, each supported by two or more contributing strategies, which created a 5-by-14 grid that would guide all corporate investment and major activities. As the Business Transformation Program business case took shape, it became clear that it would support no fewer than 10 of the 14 strategies (Figure 1). The business challenges that led to the overall SAP system decision were: to redefine the organizational structure around processes, not business units; to improve the quality and accessibility of information for all stakeholders; to create communities of collaboration that would be responsive and reduce non-operating costs; and to provide a flexible, integrated e-business and collaborative platform to allow Canada Post to move more rapidly into e-logistics, e-procurement, and other new, revenue-generating opportunities — both physically and electronically.
Figure 1 — Canada Post Corporate Vision
CRM Strategy
Canada Post's CRM strategy consists of several principles:
- Provide virtual service-delivery and self-service options — Optimize Web-based transaction capability, and integrate system knowledge with automated service or delivery acknowledgement; leverage knowledge assets, business and operational data, and technology.
- Leverage customer insight — Greet regular customers by name; have their information automatically pop up.
- Improve visibility of all customer interactions — Capture customer interactions and share them across all channels; use them to establish patterns and take the pulse of the business.
- Integrate traditional and automated intelligent interactions — Use established patterns to trigger proactive dialog.
- Provide rich customer experience across all channels — Reliable, consistent information, regardless of channel.
- Apply a relationship model for differentiated service levels — Know and serve all customers well, with special service for high-potential customers.
The Journey
Business Transformation has been the largest change initiative in Canada Post's history. Implementation has involved a two-year journey of process design, deployment, and system stabilization, and ongoing support with a team of Canada Post employees. Process redesign incorporated four major process areas: order-to-cash, procurement and sourcing management, human resources management, and financial management (Figure 2).
Figure 2 — System Integration
After recognizing lessons learned from the Y2K conversion, Canada Post sought an integrated systems solution rather than a series of best-of-breed solutions. The company chose an integrated one because its legacy systems had originated as best-of-breed decisions and ended up a mess. The business case identified 67 legacy systems to be replaced; once design was under way, more opportunities, including many nonproduction local solutions, became apparent. When complete, at least 83 legacy systems will have been replaced.
In recognition of the massive impact of reengineering four major and 700 sub- processes, 25 percent of the budget was targeted at the change management effort, which involved extensive organizational and people readiness, communications, and training.
Order-to-cash (Release 1) was launched in July 2001, followed in September 2001 by the CRM module. Customer service agents and delivery personnel now share customer transaction details such as inquiries, complaints, claims, and orders, all from a single screen.
The mySAP CRM processes (case management, order taking, Internet sales, and Internet service) provide broad and deep functionality to assist the integration and transformation of back- and front-end business processes. The CRM processes are tightly linked with the overall core enterprise system to provide access to the single source required to create the single customer view.
At approximately the same time (June 2001), the Canada Post Web site was revamped to differentiate service for consumers versus commercial customers and to provide an online business center — the cornerstone of customer self-serve capabilities. The Web site offers customer self-service for package tracing, rate calculations, service standards, and an online business center to purchase products. A set of new electronic shipping tools, available in both desktop and Web-based versions, is being deployed, enabling commercial customers to place orders directly and create all shipping documents. Enhanced interactive voice response routing integrated with SAP Phone to automate delivery of customer information to contact center agents desktops was added in May 2002.
In January 2002, new procurement, human resource, and financial processes (Release 2) were implemented and included an automated time and leave management system at 24 mail processing plants.
The Re-engineering Process
Implementation involved a two-year journey of process design, implementation, and system stabilization, and ongoing support from a large team of Canada Post employees as well as system integrators from SAP, Accenture, EDS, and IVR/telephony supplier Telus.
A consistent process design and delivery methodology was applied that expedited and integrated the work of the teams devoted to the various processes. Early in the design phase, process stakeholders were invited to participate in successive waves of conference room pilots and provided with process walkthroughs to ensure their concerns were identified early, solutions explored, and best fit achieved prior to design and configuration. The basic principle of avoiding customization wherever possible was strictly adhered to. End users and subject experts were brought in to test processes and to develop and deliver all training.
Figure 3 — Process-Based Organizational Structure
At the beginning of the project, the team and steering committee set forth a set of seven basic design principles, based on the need to be customer-focused and to deliver customer value. These principles were created to guide process design and delivery activities throughout the Business Transformation journey. The core principle, stated somewhat irreverently, was: "Every process must add value for the customer, the employee, or the corporation; otherwise, why do it at all?"
A stringent project methodology was followed. Project governance involved a Business Transformation Management Committee (chaired by the executive V.P. of business development) that met weekly with the project's team to oversee scope and deliverables and ensure executive commitment, management focus, and support by the rest of company. Several vice presidents whose processes were being re-engineered were members of this committee. Milestones were established and monitored through the committee.
Readiness: People, Processes, and Technology
Technology is just one enabler of e-business solutions; equally important is attention to process redesign and people readiness.
Objectives for Business Transformation extended well beyond the introduction of new software. Taking the broader view of system and process integration meant starting with the end-to-end simplification of all business processes; developing a blueprint for success in a process-based organization; and surrounding the implementation with extensive change management activities. Only by taking all these actions would the anticipated benefits be achievable.
Internally, the implementation was accomplished through extensive change management, involving both process and organizational redesign, with input from key internal stakeholders, extensive communications, training and coaching of employees directly affected, and ongoing monitoring and fine-tuning during the stabilization phase. More than 50,000 participant days of training were delivered to employees during the multiphased implementation.
A key transformation activity was the creation of a "change network" involving not only area project managers to ensure all site and people-readiness tasks were accomplished, but also a network of 25 Business Transformation "coaches." The coaches developed and delivered seven monthly training modules to supervisors and managers of all impacted teams, and were on call to coach leaders on their new skills.
Externally, a take-to-market team made advance contact with several of the largest customers and communicated changes directly to some 145,000 commercial customers. For post-launch system fixes and stabilization activities, any customer-facing issue was treated as the first priority. Around-the-clock attention to corrective process or system changes was the norm in the post-go-live period to reach stabilization as defined by sell and serve process owners.
In early 2001, the company restructured around four core processes — market, sell, serve, and fulfill — supported by corporate enablers/centers of excellence (Figure 3). This departure from the traditional functional silos is designed to improve horizontal communication and deliver end-to-end process accountability (for example, the senior V.P. of "sell" is overall process owner for all sales-related processes ranging from securing customers to setting up and managing their accounts right through to payment, which had formerly resided within finance as a separate function).
The second release (January 2002) went exactly according to plan, and by late spring 2002 the new system was deemed stable according to criteria defined by stakeholders.
Results and Benefits
Resulting benefits are anticipated over the next three to five years; a benefits measurement team will remain in place for several years to ensure targeted benefits are achieved. Targets include savings in labor and non-labor costs, plus increased margins, resulting in an annual return of almost half the amount invested in the project. Labor savings will arise from both process efficiencies and organizational restructuring. The initiative is able to take advantage of the reality of an aging workforce; headcount reductions are largely being managed through attrition and retirement.
Figure 4 — Business Case Benefits Summary
Other indicators include speed of case-resolution and improved operational efficiencies that resulted from order entry through electronic channels via the Internet or electronic shipping tools.
The mySAP CRM implementation strongly supports the way Canada Post wants to operate as a company; in fact, it was selected for the prestigious 2002 Gartner Award of Excellence in Customer Relationship Management. The approach was also validated in an ROI analysis conducted by Hill Holiday in May 2002 (forecasting an ROI on CRM of 26 percent over 10 years), and endorsed by the Peppers & Rogers Group, in their cover note to the report:
"In fact, we think the final ROI calculation is probably conservative .There is a lot to like about Canada Post's CRM initiative .Most notable is the time and effort invested in creating organization-wide support for the entire Business Transformation process. In our experience, the Canada Post combination of employee buy-in and executive support virtually guarantees their long-term CRM success."
Lessons Learned
The team led by Cal Hart, V.P. of Business Transformation, is now widely sought to share their knowledge of large-scale technology integration with public- and private-sector organizations, including other postal administrations from around the world. Key findings include the importance of:
- An integrated process-based system with a customer-focused core.
- Passionate executive leadership: Cal Hart manages a team of 400 and reports to the President and CEO, André Ouellet.
- Extensive management and preparation of employees for process and technology change: "Communicate!"
- Building in adequate time for integration and stress testing.
- Engaging end users in the testing and training.
- Maintaining a good relationship with stakeholders through regularly scheduled meetings to identify and resolve issues.
- Fully integrating any "add-on" technology projects (such as telephony), and defining a joint stress-testing strategy.
Next Steps
In support of its strategic priority for Strategy, Canada Post will be extending the Business Transformation platform across the Canada Post Group of companies and may expand the CRM business processes into areas such as sales opportunity management. Other potential applications include supply chain management and enhanced e-learning. With respect to supply chain products, Canada Post is interested in deploying network planning and fulfillment applications to support its courier and distribution partners.
Conclusion
The Business Transformation journey was rooted in the need to implement a more agile organizational structure, new processes, and a new technology platform. By taking an enterprise-wide view founded on the vision of providing superior customer value, the company has not only succeeded in its initial objectives, but has built a platform and methodology to deliver future legs of this journey toward a sustainable corporate future. Strategic requirements addressed include the necessity to:
- Replace outdated, complex, non-integrated technology.
- Control rising costs and excessive time to bring product changes to market.
- Reorganize around processes.
- Maintain a platform and organizational capability for future growth, particularly in the areas of e-business.
This integrated approach to transformation has strengthened Canada Post's position as a global leader.
