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.