Why Do CRM Systems fail to live up to their promise?

Gall's law

A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over with a working simple system. 

John Gall

Systemantics: How Systems Really Work and How They Fail

Most customer relationship management (CRM) implementations fail, and by most, I mean up to 75 percent. The benefits of CRM, including enhanced productivity and improved customer satisfaction, have been proven, so why does it fall short of expectations as much as three-quarters of the time?

Sameer Bhaita

Sept 19, 2014

Destination CRM.com

And this, unfortunately, reinforced a study done by Bain Capital in 2002 that showed the same results.  Companies haven’t learned much in the last 12 years.

So why do they fail?

It’s not the technology. As several experts put it, “the technology is simple, and it works”.  When you cut through the jargon, eliminate the marketing spin, reduce the technology to the basics, a CRM system centers on one thing:  a database.

It doesn’t matter how you access the database – on a desktop, on a mobile device, a server sitting in your office or via “the cloud”. It is just a database.

And while database technology is faster, cheaper, easier to access, it is still the same as it was 30 years ago.  So, at the end of the day, it is how you manage the data and how you use the data.

Three issues drive CRM failures.

1) CRM systems were designed as reporting systems

2) Users don't perceive much value in using the system

3) CRM systems create more work for most of the organization

Most CRM systems were originally designed for management reporting. These systems didn’t provide much use for the line employees, so the employees viewed them as additional work. At the heart of it, most CRM systems are still reporting systems.  Take a look at the service features from one of the more popular CRM tools:

Benefits to the Salesperson

·         Identify leads

·         Manage lead distribution

·         Allow the sales team to access the database from mobile devices

Benefits to Management

·         Track leads

·         Perform advanced forecasting

·         Integrate with the backend systems

·         Manage  the sales pipeline

·         Create sales reporting

·         Manage security

·         Allow mass communication via email or specialized communication

·         Content management of customer material

·         Provide a single source of information on each customer

As a note, CRM systems use providing a single source of information as a selling point. It really isn’t. A CRM system doesn’t do this.  It can allow anyone who has database access to see the information. But the company has to do a lot of work before implementing the CRM to achieve this goal.

·         Bring the data into a unified or single database

·         Create a single structure

·         Cleanse the database to remove duplicate entries

·         Insure all touch points are captured and stored correctly

·         Update all contact information

·         Make sure that contact information can be edited and maintained

·         The information can be accessed as required within the organization

·         Then it can be exported into the CRM system

All of this costs additional money, above and beyond, the basic CRM purchase and implementation. Yet it is one of the most critical – and often forgotten or ignored – requirements for a successful implementation.

 A highly effective CRM implementation centers more on cultural issues than technology issues. It requires the company to change its culture from internal facing to a customer-centric facing.

"Companies must instill a customer-centric sense throughout the entire organization to find success with a CRM practice," says John Freeland, then global managing partner of Accenture's CRM Services (now president of worldwide operations at Salesforce.com)

And like it or not, real cultural change takes a long time.  On average, cultural change requires about five years, not five or ten months.  Companies try to do too much, too fast.

Rather than focus on doing just a few things extremely well with a basic CRM system, most companies want the “latest and greatest” to solve all of their customer relationship problems with one silver bullet.

According to Linda Hershey, president and managing partner of LGH Consulting, "All of the reasons for failure can be summed up into one resulting cause: the belief that you can buy a customer relationship management solution." Expecting CRM technology to fix all of your customer relationship problems is putting too many demands on one piece of software. 

Even using CRM as the term, when purchasing or implementing means that a software solution is a will "solve" your customer relationship issues.  A better approach, and one better understood by the entire organization, focuses on using terms centered on:

·         Customer experience

·         Customer lifecycle (or retention)

·         Customer information (or single source of truth, although this phase is now overworked)

·         Customer management

CASE STUDY – CRM IMPLEMENTATION

A Fortune 1000 company implemented a CRM system, spending approximately $10M over three years.  It developed a business case, talked to all the users, selected a top vendor and then set up an implementation team. Six months after implementation, an audit revealed that the CRM system actually reduced sales force efficiency, rather than improved it.

Why?

Several reasons.  The sales compensation report that the new CRM system didn’t match the Finance reporting system.  Finance didn’t use the CRM system, but used the contract/billing system. Sales couldn’t keep track of their quota achievements via the new CRM system. 

It also required that both email and the new communications feature on the CRM system be checked multiple times daily by the customer contact people.  The engineering and support teams didn’t have the budget to buy licensing for the new CRM system, so they used email; the sales support staff was required to use the new CRM system.  It lead to confusion, missed communication, confused communication and backdoor channels between the organizations being developed

The customer data in the new system didn’t match the billing data due to lags, adjustments, and journal entries. This meant that the sales team needed both billing information when they talked to clients as that was the information that the clients had as well as the CRM information.

In the end, the company allowed the CRM system to “fade” away. No one wanted to admit it was a failure, but no one wanted to own it either.

Isolated failure?  No, nearly 75% of all CRM system implementation fail. And it isn't the technology. It is the strategy and organizational issues that drive the failure.

Do our IT systems provide the flexibility we need in the marketplace?

There is no more reason to think that they expected the world to remain static than there is to think that any of us holds a crystal ball.

The only way to create a foundational document that could stand the test of time was to build in enough flexibility that later generations would be able to adapt it to their own needs and uses.

                                                Diane Wood 

Barriers of entry have fallen across most industries.

Traditional competitors take new approaches.

And non-traditional competitors take very new and different approaches.

So companies must create flexibility within systems to handle the expected changes, and more importantly, the unexpected changes.

Today, IT system changes represent the bottle neck in every part of an organization - operations, billing, finance, marketing, customer service, supply chain, human resources. 

And changes in the market place won't stop. The pace of these changes will accelerate, not slow down.

So the question is rather simple to ask but extremely difficult to answer:

If conditions change, and systems have to change to meet the new market place conditions,

·         how fast can a company change the systems

·         how much would it cost

·         how long will it take

·         what would be the impact during the change?

These questions require a great deal of time and effort to analyze and answer.

But, ultimately, these may be the most important questions of all to ask.

Because all of us know one thing - what works well today, won't work well tomorrow.

Questions to ask:

·         How do our business and IT systems adaptability measure up with our direct competitors?

·         Our potential competitors?

·         Do we have a long term plan in place for our systems that meet our short term and long term goals?

·         Do our systems give us a strategic advantage over our current and projected competitors?

·         Can we reconcile information across systems with minimum effort or do we have to spend a great deal of time and resources on it?

·         Does operations, finance, marketing, billing, human resources systems all talk to each other?

CASE STUDY - THE DIGITAL REVOLUTION

The Digital Revolution

Forrester’s “Trends for the B2C CMO to watch in 2013” report warns new digital disruptors will threaten all businesses– such as YouTube challenging broadcasters and bank platforms competing with services such as Square – if marketers do not expand the utility and value of the experience their brands deliver.

The report suggests marketing budget should be repurposed out of channel silos and into new cross-platform divisions organized around consumer segments, with experts on the relevant media, channels and devices sitting within the new product or services verticals.

Underpinning the call is its forecast digital budgets will become 20 per cent of total marketing budgets in 2013, accounting for $50bn (£31bn) worldwide.

Corinne Munchbach, Forrester’s CMO and market leadership professional’s analyst and author of the report told Marketing Week: “Consumers switch from in store, to online, to mobile - sometimes all at once. Having separate budgets for each is counter intuitive to what customers are actually experiencing. Logical brands will be able to join all this together in a functional way to deliver the experiences customers expect from them.”

Shaun Gregory, Telefonica’s global advertising director, says other major brands need to organize themselves in this way going forward.

“Ultimately you have to push your own personal specialism’s to one side and think of your consumer – when did you last hear a consumer talking about ‘digital?’ they just see it as a multitude of screens. The [marketing] industry needs to catch up with consumers’ behavior – even though there may be push back from talent and [specialist] agencies,” he adds.

Forrester’s Digital  Marketing Predication Spark Hot Debate

Marketing Week, Jan, 2013

Does your technology plan tied together with your long term strategy?

What's more, a recent Forrester survey found that although 50% of firms say that investing in systems to improve engagement with customers and partners is a high or critical priority, the majority see workforce computing technology as a cost and risk center, instead of an enormous opportunity for competitive advantage. Why? Because there is seldom a clear destination in mind, a rational plan to get there, and a viable system in place to execute the plan. Most of the time, the destination and the means to get there are only vague estimates, and the elements of strategy are rooted in hope.

           

              David Johnson                                       

            4 Key Elements: Strategic IT Plans         

Information Week                                   

Too often, companies view technology as a cost to avoid unless necessary.  This results in multiple systems within the company – each purchased to optimize a particular department or function, but don’t strategically fit together very well.

Before you can have a well define, robust IT strategy, you need a well define long term strategy.  Then you can tie your IT plan to your long term strategy.

Many studies indicate that over 80% of all new technology system investments fail to live up to expectations.  And, as more and more of the IT system spending "exits" the IT department, it will only get worse.

Companies have to hold IT and Marketing systems accountable just like any other part of the operations. So investment upgrades in these systems should focus on:

·         New opportunities in new markets by adding capabilities companies currently don’t have.

·         Increased revenue

·         Decreasing cost

·         Increasing productivity

Five things will help insure that your IT and Marketing system projects come in on time and on budget.

1.        Make sure that you have a well define set of requirements, with critical dates, budgets, and check offs that everyone agrees to before any work starts on the project.  This will prevent scope creep and help keep the current budget under control. In reality, this may take up to 25% of the time for the project implementation if done correctly.

2.       Assign an Executive Management sponsor to oversee the project. Make sure that regular updates are provide to the Executive team and critical deadlines and milestones are hit. 

3.       Put someone in charge of the project that has relevant experience.

4.       Insure extensive testing is done.

5.        Do one let the deadline drive the implementation  schedule.  Especially do not pick a dead and then work backwards to determine the schedule.

Virtually no IT or marketing systems have failed due to a technology issue. It seems that all the systems failures studied fail due to a process implementation issue.

Anywhere else in the organization, this would not be tolerated. Yet again and again, studies indicate that up to 60% of all IT system implementations either fail to deliver the promised results, hit the deadline, or over run the budget by more than 50%.

IT Investment Questions to Consider:

  

·         Has the project requirements truly been scoped out and everyone agreed to these requirements?

·         Do we have the right person leading the project implementation team?

·         Can we live with it if this project goes over budget by 50% or takes 50% longer than plan?

·         Has the opportunity and threat from IT been quantified by business unit and by market?

·         If so, how much?

·         And whose head is on the chopping block to make these numbers (revenue, cost) work?

·         Do our current plans reflect that opportunity?

·         Do our current plans minimize any threat?

·         What are the risks we are taking OR not taking by accepting this level of investment?

·         Do our investments in IT match our strategic plans?

·         How do they match up?

·         What capabilities do this provide that we do not currently have?

·         How can we compete better, stronger, faster, in which new markets due to this investment?

·         How long will it take?

CASE STUDY  - HOW DANGEROUS ARE IT PROJECTS?

Why Your IT Project May Be Riskier Than You Think

An alarming study by Flyvbjerg and Budzier published in the Harvard Business Review has made everyone stand-up and take notice. The coherent advice being that IT projects are much more riskier than we think.

"When we broke down the projects’ cost overruns, what we found surprised us. The average overrun was 27%—but that figure masks a far more alarming one. Graphing the projects’ budget overruns reveals a “fat tail”—a large number of gigantic overages. Fully one in six of the projects we studied was a black swan, with a cost overrun of 200%, on average, and a schedule overrun of almost 70%. 

This highlights the true pitfall of IT change initiatives: It’s not that they’re particularly prone to high cost overruns on average, as management consultants and academic studies have previously suggested. It’s that an unusually large proportion of them incur massive overages—that is, there are a disproportionate number of black swans. 

By focusing on averages instead of the more damaging outliers, most managers and consultants have been missing the real problem."

HBR, Sept, 2011

Customer Expectations - Then and Now

After British Airways lost his father's luggage, Hasan Syed didn't just tweet his complaints at the company. He paid for a "sponsored tweet" to broadcast his frustration directly to British Airways 302,000 Twitter followers.

"Don't fly @BritishAirways,"

                                     Sept 2rd, 2013

Customer expectations change.  And these expectations change as customers experiences change. And today, when a customer experiences bad customer service, he or she can tell everyone in the world about that bad experience.

The term delighting your customer has taken on a cliché.  And everyone seems to agree with that approach.

Forget it.

Consumer's punish companies that provide bad service far more often that they reward companies for exceptional service.  

Customer that receive high mark for great customer service start early.

These companies build the customer expectation in the in the customer's mind.

These companies make sure that they build the right expectations. 

Then they deliver on those expectations day in and day out every time they interact with the customer. 

The new rule: 

Customer’s used to compare your customer service to your direct competitors. Now, customers compare your customer service to best in class providers from any industry.

If you do build a great experience, customers tell each other about that. Word of mouth is very powerful.

If you make customers unhappy in the physical world, they might each tell 6 friends. If you make customers unhappy on the Internet, they can each tell 6,000 friends.
                       

                        Jeff Bezos, CEO Amazon

Companies that rank highly for "exceptional customer experience" take care to build customer expectations and then match those customer expectations to what they delivery.

Amazon, Nordstrom, Publix, Apple, FedEx and Costco all rank as "companies providing the best customer experience" year in and year out.

And all make sure they match customer expectations to customer experience.

True customer loyalty centers on how often people will recommend a company to someone else.  And if you ask them why they make this recommendation, most say the same thing - use this company and they won't disappoint you.

So the question  a company should ask is:

 What do customer want, do these match the expectations we have built in our customer's mind, AND can we meet or exceed these expectations day in and day out?

And does the technology we provide allow us to do these things,  or does it hinder us,  or prevent us from doing these things?

Companies' have to listen to customers. 

And customers speak in many different places today.

What do customer want, do these match the expectations we have built in our customer's mind, AND can we meet or exceed these expectations day in and day out?

And does the technology we provide allow us to do these things,  or does it hinder us,  or prevent us from doing these things?

Companies' have to listen to customers.  

Social media gives customers more places to talk to each other, to company, and to the general public than at any time in history.

This means collecting both structured and unstructured data (text messages, video, location, etc). 

The amount of unstructured data created now exceeds the amount of structured data many time over each day.  

Companies have to know what customers are saying about their companies and their products on a wide variety of social media - Facebook, Flickr, websites, Twitter, YouTube and everywhere else.

And this means investing in technology.

 That technology will include:

·         investing in big data, analytics

·         modeling

·         campaign tracking to understand your customers

 You also have to know where your customers are and in what channels. And why they are in those channels.

Customer's expect that a  relationship with them rather than a transaction.  Companies do that by creating:

·         targeted  messages

·         providing a one on one experiences

·         showing that the company knows the customer.

Companies win or lose customers every day by how they interact with the customer. Each time you interact with your customer, you either exceed,  meet or fall short of that customer's expectation.

And these thousands of daily interactions determine whether your company succeeds over the long term. 

Strategy doesn’t do this, management doesn’t do this.

The day to day interactions make or break company’s ability to meet customer expectations.  And the technology a company provides either helps or hurts this ability.

Not meeting customer expectations drives a consumer to using price as the decision point in selecting you. 

Social Media Overview

Controlling the Message

A key fact that companies simply have to deal with - they have lost control of their ability to control their message to the public.

Today, with social media, anyone can become a publisher. broadcaster, critic or advertiser of bad customer experiences.  

And now, anyone can reach literally hundreds of thousands of existing and potentially customers at minimum cost.

For example, movies are made or broken on opening night on Twitter.

Facebook currently has over 1 Billion active members, Flickr  publishes  over 3.6 billion pictures, and Twitter users post over 200 million tweets a day. YouTube's 600 million users upload more content in 45 days than all the TV material created in the first 70 years of TV.

And if someone doesn't like your product, or your company, he or she can let the whole world know why faster than you can respond.

Meeting customer expectations is no longer a criteria for success but for survival. Exceeding customer expectations and creating customer champions in the social media market place is a criteria for growth.

Customer Expectation Questions to Consider:

·         How do we listen to our customers, collect information from our customers, and use this information to make decisions?

·         How does our customer experience compare with that of leaders in other sectors?

·         More importantly, how do our customers compare our experience to their expectations?

·         Unless your comparing yourself to one of the top 10 industry leaders, this represents the minimum bar to measure yourself against.

·         Customer's now operate in an always on, 24/7  environment, how will we handle those non-business hour request?

·         Are customer expectations set by our industry or by experience in other industries?

·         Do you measure customer expectations on a continuous basis? The best do.

·          And are you improving every year? Are you measuring that improvement?

·         What will our customers expect in the future, and what will it take to delight them?

·         What do your customers really say about you?

·         Are they delighted to do business with you?

·         More importantly, are they willing to recommend you to their friends or associates?

·         How do our technology plans support our customer expectations?

·         Does your technology make it easier for your people to meet or exceed your customer expectations?

·         Or is just a cost center where you try to minimize cost and provide just enough?

·         Do we do business with our customers the way they want us to do business with them? Do we communicate with them the right way?

·         In the right channels, with the right information, at the right time, with the right products?

CASE STUDY LL BEAN REAL TIME OPERATIONS

LL Bean

Real Time Operations

LL Bean consistently ranks as the having the best customer service of any company in the world.  Part of the reason for this outstanding customer service centers on the investment in LL Bean's call center technology.

The company's contact center system is “geared around bringing as much information to the rep as possible, so they don’t have to spend a lot of time memorizing things.”  This includes the customer's past order history, payment history, and preferences.  The goal is simple - make LL Bean easy to do business with and maintain as helpful approach as possible.

Bean’s customers frequently say things like, “‘I bought this really lovely jacket two years ago and I would really love another one. And they might not be able to find it in the catalog they have. So we have access to their ordering history so we can find it pretty quickly – which makes it easier to give them what they need.”

The cataloger has also made its order entry system more visual, she adds. “The images we use on the Web are now available on the order entry system, so the rep is looking at the same thing that the customer is, whether it’s in the catalog or on the Website.”

LL Bean trains it's agents extensively, and relies on a pool of people around it's call centers for temporary staffing that has worked their for years during holiday seasons.  But it also believes that using technology, on a real time or near real time basis, eliminates the "tribal knowledge" requirement, increase effectiveness, and allows more flexible staffing.

Multi-Channel Merchant

Survey Shows LL Bean Top in Customer Service