This white paper looks at the top three reasons that CRM initiatives fail to achieve their goals and provides clear, practical recommendations for ensuring that your CRM initiative avoids these pitfalls and delivers desired returns.
Top 3 reasons for CRM failures and how to avoid them
W H I T E P A P E RThe Top 3 Reasons CRM Initiatives(Still) Fail—And How to Avoid Them Executive Summary Customer relationship management continues to be a vital strategy for achieving higher profitability, improved productivity, lower costs, stronger customer retention, and greater insight into customer and prospect behavior—whatever the economic environ- ment. But while CRM success rates have risen dramatically over the years, many companies still struggle to achieve the return on investment they anticipated. This white paper looks at the top three reasons that CRM initiatives fail to achieve their goals and provides clear, practical recommendations for ensuring that your CRM initiative avoids these pitfalls and delivers desired returns.
CRM Success Fundamentals their products. Nothing gets their prospects’ attention faster than a distinctive product feature their competitors can’t In spite of global economic challenges, many businesses match. But discussing features and functions is the easiest continue to make investments in customer relationship part of CRM. When it comes to the actual features of management (CRM) systems a high priority, recognizing CRM software, there is only a limited number of variables that strong customer relationships are vital to their that come into play, and in fact platform and architecture business success. These organizations seek higher are probably bigger success factors and differentiators profitability, improved productivity, lower costs, stronger between CRM solutions than the features themselves. customer retention, and greater insight into customer However, when you look past the ones and zeroes, you and prospect behavior. These companies’ confidence start to see the truly complex side of CRM: the human in CRM’s value confirms the business community’s side. Diverse and sometimes vast teams of individual consensus that the early age of bloated CRM projects and users have to be considered for a company to reap the high-profile failures has been superseded by an era of full benefits of CRM. At that point, the number of variables success stories and widespread evidence of CRM’s ability a company must account for in CRM selection and to generate returns on investment. implementation can grow exponentially. Yet, although it is true that major improvements have been The key issue at the heart of the “human side” of CRM made in CRM technology and outcomes over the past two implementation is user adoption. Even the best CRM decades, it is also true that many companies still struggle system will fail to deliver significant ROI if the end users to implement their CRM system effectively and achieve aren’t able or willing to use it correctly—or worse yet, if the results they expect from these powerful information they don’t use it at all. Many organizations select and systems. In fact, in response to a recent Forrester survey, implement a terrific software solution, only to struggle with only one third of enterprise-class organizations indicated getting their employees on board with the new system, that their CRM applications significantly improved not to mention the customer-centric culture required to their end users’ productivity. And only half responded support it, which in many cases is also a major change for that their CRM vendor’s professional services team the organization. could offer significant technical skills to help move the implementation forward.1 Change management is clearly an associated key issue. There’s only one thing more difficult than getting a person This same survey documented over 200 specific problems to change the way he or she works, and that’s getting companies had with their CRM implementations. But entire teams of people to change the way they work. the real attention-getting finding concerned the types of Change—even the positive kind—is challenging and problems it uncovered—a requires astute planning and leadership to gently guide it finding that sheds some though to fruition, especially in larger corporations.Only 33% of the problems interesting light on the true challenge of CRMcompanies experienced These people issues are just as important—if not more implementation. Only 33% so—than the technology issues CRM customers face,had anything to do with of the problems companies and they can as easily cause a project to fail. So it makestechnology experienced had anything to sense that CRM providers should not only offer a solid do with technology. The lion’s software product, but also a world-class professional share focused squarely on services team and full complement of supporting services problems concerning people, process, corporate strategy, to help their customers deal with these very complex user and other non-software types of issues. issues. With the right mix of technology and services, the human factors of CRM can be effectively managed with These results warrant further investigation. Could it be profitable results. that companies implementing CRM could improve their success by focusing less exclusively on the software and Sadly, many CRM vendors completely overlook this critical more on managing the organizational change necessary aspect of CRM. Their organizations are designed to sell to implement it? This white paper will focus on exactly software licenses and (often costly) technical implementation that: the top factors—completely above and beyond the services, not to manage a customer’s overall transition and software itself—that cause companies to struggle to reap ongoing success. When a greater range of CRM services the rewards of their investment in CRM, and what they can is available, the customer is often rightfully wary that CRM focus on to improve their odds of success. vendors and consultants may be determined to prolong and over-complexify a CRM project simply in order to generate The Most Overlooked Factor in the greatest number of billable hours. CRM Success: People Such short-sighted tactics do little to genuinely ensure CRM success. The critical nature of human factors at As you would expect, CRM providers spend a lot of work in a CRM initiative demands that you focus as much marketing effort promoting the technological features of attention on the people using the system as you do on the software. It’s not the software that will give you the 1. Band, William. Risk-Proofing Your CRM Initiative. DestinationCRM.com. March 1, 2009. URL: http://www.destinationcrm.com/Articles/?ArticleID=52945 Pivotal CRM | White Paper 1
ROI you want; it’s the people who implement it, use it, and adequately calculate the value the enterprise will manage by it. gain from a new CRM system, they must establish a baseline measurement of what current CRM With this in mind, let’s take a look at some of the top processes are, whether they are implementing reasons CRM implementations fail, even when they their first CRM system or replacing one they have involve excellent CRM solutions and are driven by savvy, outgrown. Then they will have a valid way to well-intentioned technology and business professionals. measure the enhancements the CRM system will bring. But because many executives feel like they Reason #1: Companies Can’t know their company so well, they tend to disregard this very important practice. Just because there Effectively Define Success is a documented customer relationship process in place today doesn’t mean it’s being followed Strategic CRM implementations are often major projects, properly, and seldom does a company have an requiring significant corporate commitment. Given this, accurate record of the rate and costs of errors and it is reasonable to suppose that all companies pursuing redundancies, or of the time it takes to perform CRM initiatives have sound and well-articulated goals certain tasks or processes. But without this and rationales for their CRM projects. Yet almost 20% of information, measuring the efficiency, productivity, Forrester’s survey respondents cited strategy and poorly and accuracy gains from CRM can be very difficult. defined requirements as significant barriers to return on Documenting current CRM processes can take their CRM investments.2 The extra time and effort, but you will never know if your unfortunate result is that most CRM practices have truly improved unless you can executive leaders have no way document what those practices look like today.If you haven’t agreed on a to prove their CRM systemsdefinition of success, how have produced the ROI they 3. Establish Success Metrics. When executiveswill you know whether you’ve have a clear picture of the current state of their had hoped for—or any ROI at CRM practices, the improvement goals becomeachieved it? all, for that matter—because much clearer. So do the metrics they should use they neither defined their to objectively measure their progress toward targets in advance nor those goals. And because no single metric can determined how they would be measured. If you haven’t adequately measure ROI from a complex CRM agreed on a definition of success, how will you know system, executives must decide which metrics whether you’ve achieved it? would have the biggest impact on their company’s Executive leaders must take the time up front to decide strategic goals. There are input metrics that what successful ROI would look like for their specific measure the accuracy and validity of data entered situation. They must know what their customer relation- by system users. Also available are process ship processes are today, as well as how they hope to metrics, which measure the execution of individual change them for the future and how they will evaluate their sales team members on a more qualitative scale. progress against these goals. Laying the groundwork for Finally, outcome metrics measure the desired CRM success in 3 key areas can help ensure you get the outcomes of the CRM process: customer calls, ROI you expect: presentations, demonstrations, and orders, for example. Top managers should use a mix of 1. Craft a Clear Business Case. Crafting a solid these metrics to gauge their company’s overall business case may sound simple. It’s not. Many performance toward meeting their CRM goals. companies try to shortcut the process by assem- Because these metrics have differing levels of bling a business case from basic rules of thumb granularity, it will become clearer where managers or by simply mirroring another organization’s CRM need to spend their time to correct CRM problems initiative. This almost always proves to be a costly early in the process. There is no single “right mistake. Every organization is unique, with unique answer” in prioritizing CRM goals and metrics—in processes and considerations, and thus every fact, many companies find that the qualitative CRM implementation is unique. Executives must “soft” returns are infinitely more meaningful to their recognize the idiosyncrasies of their organizations business than the quantitative “hard” returns—as that might affect the outcome of their CRM initia- it is all dependent on the company’s unique goals tive. Having a clear problem statement goes a long and strategy. way toward keeping the implementation on track. And while constant steering corrections will still be No CRM system will deliver significant ROI without a clear, required, those navigational changes will be much overarching strategy to guide its implementation and more effective when guided by the proper execu- use. That means everyone in the enterprise—from top tive vision of the problem to be solved. management down to the end users of the system—must clearly understand what they are trying to accomplish with 2. Document the Current CRM Condition. the tool. Business process engineers know that in order to 2. Ibid. Pivotal CRM | White Paper 2
This direction must come from the top. Executive • What is my budget for getting the software installed, sponsors must develop a clear business case for their and will I have to hire expensive outside consultants new CRM software. They have to agree on strategic and to help? tactical goals for what they hope to accomplish and a The CIO’s concerns are every bit as valid as the CEO’s. realistic timeframe for getting it done, then work to gain But the CIO is measured by technology concerns instead buy-in throughout the organization. of business issues. Without constant steering corrections in the interests of the business goals of a CRM project, Reason #2: Companies View the final product is at risk of becoming an IT solution, but not a business solution. It may be on time and on budget CRM as an IT Project, Rather and meet a range of technical criteria, but whether it aligns with corporate strategy is another matter entirely. Than a Business Initiative Armed with an effective business case and a clear problem statement, your enterprise can generate a great deal of Reason #3: Companies CRM momentum. The corporate vision and core company Automate a Misaligned Process values set the course for a successful implementation. Yet As powerful and helpful as CRM software can be, at its root, we still see many CRM systems it is not performing any feats of magic. Ultimately, like other end up as little more than a forms of software, CRM simply streamlines and automatesWithout constant steering management reporting tool, what would otherwise be time-consuming, challenging, orcorrections in the interests leaving the actual customer repetitive processes. If these processes are misguided or experience virtually unchanged.of the business goals, the broken to begin with, automation will not fix them.final product is at risk of Why is this? It has very little to do with the software. But it Therefore, in order for an enterprise to garner a significantbecoming an IT solution, but return on its investment in CRM technology, its customer has everything to do with thenot a business solution focus of the organizations who relationship processes must be sound, well documented, implement the system. and precisely aligned with the mission of the enterprise itself. When evaluating a CRM system, most executives start out Process alignment is an area in which most businesses asking exactly the right questions: have room for improvement. The majority of enterprises find it difficult to agree on what their current processes are, • How can the system make doing business with us much less what they should be. Or worse: they discover more positive? their processes are misaligned only after a new system is • How can we use the system to drive repeat sales and implemented and end-user training has begun. encourage customer loyalty? If your organization attempts to implement a strategic CRM • How can the software streamline our processes and system without having your existing or desired processes increase business insight? well aligned and documented beforehand, you will be in These are very good questions to ask. And if they stay for a rough ride. Without process clarity and alignment, at the forefront of the actual execution, they will guide automation is unlikely to produce clear benefits. the enterprise toward a successful implementation In many ways, business process alignment is actually and positive ROI. However, once these questions are more important than the software itself. Once a process answered to top management’s satisfaction, that’s where has been aligned, understood, agreed to, and well their guiding force tends to lose steam. For at this point, documented, the technology requirements tend to flow many executives mistakenly assume their job is done. naturally from the process. Conversely, no software So they take their hands completely off the steering product can deliver business value from a process that wheel and hand it to the IT department for selection and was off-kilter from the start. implementation. Now CRM has been demoted from “corporate strategy” to “IT project.” This is not to say that the software is unimportant—in fact, the importance of process clarity and refinement under- Naturally, IT departments are crucial to successful CRM lines the value of having a highly adaptive and malleable implementations. But many top executives tend to forget CRM software solution that can precisely model your that the CIO operates from a much more granular set desired processes—but it does suggest that even the of job concerns—concerns that focus more on software best technology will fail to deliver results if the processes packages than customer relationships. themselves are misaligned. Approach CRM initiatives The CIO’s questions sound more like: as an opportunity for greater process clarity, alignment, definition, and refinement, rather than an excuse to lay • What is our deadline for implementation and can we software on top of existing processes—or worse, to allow meet it with current IT staff? technology to impose new cookie-cutter “out of the box” • How can I get our other 10 data repositories to talk to processes that don’t fit your business—and you will this new system? experience far greater success. Pivotal CRM | White Paper 3
The Solution: The 3-Legged Stool CRM implementers realize how flawed this approach is. Because each company’s business processes of CRM Professional Services are different, their usage of a CRM system will always be unique. Generic training materials and The three components that always impact a successful courses will therefore always fall short. CRM vendors CRM implementation are people, process, and know this, and those who are genuinely committed technology—the famous three-legged stool (if any leg to their customers’ success take the time to fails, the stool collapses). People need to embrace and understand your unique needs and processes and use the system in order for the company to achieve its design customer training programs and tools to best goals. Process must be effectively defined and mapped address your company’s specific demands. within the system for it to generate results. And finally, the technology must be sound, with all the right features in 3. Proper Metrics and Rewards. It’s been said, place, the right fit to your business, and the right ties to “Show me how you’re compensated, and I’ll show other enterprise systems and data sources. you how you behave.” As much as we would like to think users will embrace a CRM system just Many CRM implementations fail because both the because it has been launched, reality proves implementing company and the CRM vendor assisting otherwise. Many organizations report deficiencies them focus too narrowly on the “technology” leg of the in the areas of inter- and intra-organizational stool alone. In contrast, the most effective CRM software collaboration, business–IT collaboration, and vendors build on these three performance measurement aligned with customer- principles jointly and never facing goals. A lot of this comes down to settingMany CRM implementations losing sight of the all-important out clear ways of measuring and encouraging people and process factors. usage of the CRM system. It’s important to providefail because both the They help customers build a incentives to end users in a way that aligns theircompany and the CRM stable three-legged stool by behavior to the goals of the enterprise. Thevendor assisting them supporting and assisting in most astute companies find creative ways to tiefocus too narrowly on the all three elements. With this adoption incentives to employee compensation—“technology” leg of the stool robust, threefold approach the straightest line between the desired behavior to CRM services, they can and actual performance. Then users know exactly advise customers not just "what’s in it for them" and gladly exhibit the on the technical elements of the implementation, but behaviors needed to achieve CRM success. But on every facet that might impact user adoption and as with other elements of CRM implementations, ultimate success. CRM vendors that understand this there is no single “right way” to do this—there are principle will not just offer great software, but also provide many organizational culture and process factors a comprehensive portfolio of supporting services that that must be considered in setting CRM metrics can help companies succeed in all areas of their CRM and incentives. A good CRM vendor will provide implementation, including: strategic assistance to your company to help you find a program that will work best to achieve your 1. A Comprehensive Communications Strategy. unique business goals. Understanding your CRM goals and strategy is crucial, but communicating this to users is just Because this human element is so crucial, it pays to as important. That’s why the most successful choose a CRM provider with a strong professional companies start communicating with CRM end services philosophy and organization to mentor you and users early in the process, preferably before your leadership team through the process. Look for a they select a CRM system or even define its CRM vendor that is also a services leader with a strong requirements. All stakeholders and eventual track record of implementing successful CRM systems end users need to have some kind of role or with companies your size. The professional services team representation in CRM planning and roll-out should comprise seasoned experts in the areas of user to have a sense of ownership in the project’s adoption, process guidance, and change management. success. Clear, two-way communication about a CRM project’s goals and all efforts to incorporate The benefits to this kind of experienced guidance are and address the needs of diverse user groups immeasurable. Working with experts invested in your must start early and continue throughout success lays the groundwork necessary to dodge the implementation and beyond. A vendor that costly mistakes that plague so many unwary CRM understands the importance of CRM user adoption customers. You’ll have a clear picture of success. There’ll and buy-in will offer assistance with planning and be no question whether or not you’ve achieved what you implementing a comprehensive communication set out to accomplish with CRM. And you’ll be on your strategy to complement the software project. way to enjoying a real advantage over competitors in your market space. 2. Effective End-User Training. Training is an area where many CRM vendors tend to cut corners. In an effort to achieve an economy of scale, they standardize their end-user training with cookie- cutter materials and methods. The most effective Pivotal CRM | White Paper 4