| Experts Corner |  CRM investment is wasted if the intelligence it delivers fails to influence despatched communications. How can businesses ensure that money spent on CRM analytics actually begins to benefit the messages that are delivered to customers and prospects?
David Jefferies, Marketing Director, Pitney Bowes
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Start getting ROI from your CRM programmes Early
By Michael Meltzer, Managing Partner, Active Management Techniques
Most businesses have learnt to their cost that attempting to implement large scale technology based CRM solutions do not automatically generate any where near the now fictional ROI’s they first thought of to justify their expenditures.
The necessity that you have to change the business processes, the culture and your business model has taken a long time to sink in for many business leaders. It may yet be a false dawn but maybe they are beginning now to realise that you must spend time thinking through why, how and what you are doing when you undertake any organisational innovation and especially ones that involve people, process and technology. Then that planning must be turned into real actions not merely the strategy of hope or mere lip service.
With the focus on ROI you must ask yourself how can a company go ahead with a programme, if the expected returns were really fictional. Well at the time the business case builders may well have believed the numbers were achievable but time and poor execution have destroyed that rose tinted reality. You must further try to understand an organisations effort in building a sound business case in the first place. It appears that so many of the current articles focus on the outcomes of investments without taking into account that to get to where they are now (little or no return on their investment) someone had to have built a business case in the first place.
In many organisations, the development of a sound business case is the norm, yet this norm of building a business case upfront may not be followed up by measuring the subsequent outcomes. Few business cases build in the needed metrics that enable the expected outcomes to be measured in the future. Added to this, the fact that few organisations revisit their investments to see whether the expected returns were achieved means that the original business case can actually be made up of fictitious numbers that may have no bearing on today’s reality. Yet there are means of demonstrating early and useful returns on your CRM programme, if you if you plan for them.
Your ability to measure expected ROI from your investments in CRM solutions depends on what you are actually investing in and how you go about making decisions in your organisation. The more specific you can be to the actual outcomes the more you can identify exact returns. However, this can lead to paralysis by analysis. Some organisations manage to get what they want using the senior sponsor who feels the need to change and innovate yet cannot really get the numbers to justify his call. This however does not mean that pre-CRM planning is not undertaken but that the final decision to make it happen is not led by the numbers but by the instincts of a senior manager.
For a visual representation of an organisational impact model of investment decision-making, see figures 1. and 2. In figure 1 you can see that this organisation believes strongly in understanding the business case for any major investment decision. In figure 2 the emphasis is on senior decision makers willing to take risks with little analysis.
Using the figures above we tackle each element in a clockwise direction. Work on the analytical aspects of investment decision making is lengthy whilst the other, softer aspects of an organisation move us towards strategic studies, social psychology, anthropology and organisational ecology. Perception is reality in organisational life and what you perceive is probably what you get. I will only discuss briefly here the softer aspects, but they can make or break even the most well-crafted analytical business case.
Analytical (economic man) approaches to decision making have all the hallmarks of the rational business manager guided by logic, a calculator and strategic insight. Studies in this area have been extensive, with articles written and companies being formed around the concept of building the better and more efficacious business case. Yet the reality for many organisations is that to get an ROI your best bet is to identify how you will cut costs not how you will improve the business. This has been the most direct way of justifying the introduction of new technologies, be they SFA’s or call/contact centres. You simply compare the cost of the new system against the one you are displacing or avoiding. Lower costs are substituted for higher on the assumption that the new system’s benefits and gains in productivity are equal to or better than the existing system.
If a company is automating a function, task or process and/or reducing or avoiding costs by re-engineering, then this tends to be the method used. This approach can also be used if there is some certainty in the cost reductions you can achieve in a particular project. The problem here is that the certainty is in the eye of the current management. Often by the time the technology is installed they have moved on and it is another set of managers that must justify the running costs, over budget costs and or the lack of any real benefits from the new system in the near term. So the courageous or ‘foolish’ manager takes that leap of faith to invest without any real numbers to back him up.
Cost reduction methods in business case development have their place but the metrics and the required benefits must be put in place at the start of the programme, as do the plans for revisiting the results. The real problem that any business case builders face when undertaking a CRM programme is the lack of base data that is required to enable future measure to have any meaning. This data can take the form of customer profitability, cost to serve, retention rates, cross-sell ratios, profit patterns and many more. Much of the CRM programme is to grapple with these opportunities and create those metrics for future use. Expecting theme to exist before you undertake your CRM programme is often merely wishful thinking. There are also too many independent variables with benefits that are soft and difficult to quantify. Courage, leadership and foresight must then have a place when considering the future of an organisation. CRM is all about the future strategy of the organisation, its growth and change opportunities not only reducing the costs although this too can be part of the package.
That leap of faith manager leaders make can be justified if the approach he/she helps bring to term enables the organisation to get some early yet valuable wins (Early ROI). To achieve this there is an approach called pre-CRM methodology that views the following as a prerequisite so you get your thinking straight:
1. Identify where you are trying to get to.
2. Know why you want to get there.
3. Make sure your internal customers are fully engaged.
4. Build a sound business case based on early returns if not a full payback and use sound business case tools.
5. Make sure you have the right internal support and leadership.
6. Evaluate the vendors’ offerings and this is the fun (easy??) bit choose wisely.
7. Make plans for people, the processes and the technology.
8. Make sure the plans for the people and process are actually carried through – there can be no mere lip service here!
9. Study success not analyse failure – your business may not be unique but your people and the information you have are!
10. Don’t be over ambitious but provide a path to the future that takes the CKI towards supporting all CRM initiatives.
11. Oh yes don’t forget the connectivity you need to the rest of the organisation and of course some reference to OLAP tools.
12. Keep planning and implementing incremental changes forever.
13. Keep training your team and the internal customers who will benefit from the customer knowledge captured.
Pre-CRM methods emphasise the planning you must undertake that involves the people and process side of the of any business innovation. The people part makes a hell of a difference to any outcome and they must be engaged and onside very early on. The objective here is to ensure that any investment pays off early and that the benefits wanted are actually achieved. To do this you must understand where you are now and have the end in mind even though that actual end will alter due to market and internal forces. You might also consider that any introduction of new technology demands that you reengineer your business and processes. Now the belief that you can carry on as before must be put to rest - change is inevitable and this is the part that most organisations find tough. Putting in new technology and assuming that all the benefits will accrue without a hiccup is naïve in the extreme. Yet incremental change through people and process focused facilitated workshops led by experienced individuals can help reduce the pain and can help ensure the quick productivity gains demanded. Part of the process requires that you actually map where you are now, this then enables you to see the low hanging fruit and capture the processes of putting them in your basket of speedy returns on your investments.
The idea that you can expect early returns on investing in huge lumps of technology without following the instrumentalist, iterative approach is borne out by recent studies about how long it really takes for investments in technology to bear fruit: “investing in computers does not automatically boost productivity …; firms need to reorganise their business practices as well” . The idea is that the huge investments that were and are being made in technology and our specific area CRM, tend to show their returns years after the investment were made. Although this may seem common sense to most some still believe that returns must be instantaneous (or at least by the next quarter) to be of any real value to a shareholder. It takes time for organisations to absorb the technologies and the organisational and process changes necessary to start seeing the productivity gains they always wanted. Investing in CRM solutions is necessary but not sufficient to ensue you will get the productivity gains.
You must invest early in the Pre-CRM approach that tackles the people and process issues that enable you to achieve those early but important small wins.
Michael Meltzer, Managing Partner, Active Management Techniques
Michael Meltzer is a managing partner of Active Management Techniques that specialises in advising organisations on the use and the benefits of information to support relationship management in all its forms. He is a hands on partner who has experience spanning financial services, telecommunications, education and retailing. He has specialised in uses of information to support internal and external customer relationship management, e-business, customer knowledge and building organisations where innovation and learning can flourish. He is a respected author, sought after speaker, educator, consultant and experienced business manager.
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