1. Assessing the Readiness of Firms for CRM:
A Literature Review and Research Model
Rosalie J. Ocker, Ph.D. Susan Mudambi, Ph.D.
Management Information Systems Marketing
Fox School of Business & Management
Temple University
Philadelphia, PA
ocker@temple.edu smudambi@temple.edu
Abstract
The concept of customer relationship management
(CRM) resonates with managers in today's competitive
economy. Yet recent articles in the business press have
described CRM implementation failures, and consequent
company reluctance to invest in CRM. The potential for
substantially improved customer relationship
management, coupled with the high uncertainty
surrounding failed implementation efforts, calls for a
critical new look at the determinants of, and influences
upon, a firmâs decision to adopt CRM. This paper
responds by underscoring the criticality of performing a
deep analysis of a firmâs readiness to undertake a CRM
initiative. We suggest that this assessment provide
detailed answers to two fundamental questions: What is a
firmâs current CRM capability? and What changes must
be in place before embarking on a CRM initiative? A
model to assess readiness is developed based upon the
premise that business value is enhanced through the
alignment of complementary factors occurring along
three dimensions, intellectual, social, and technological.
1. Introduction
A compelling business case and success stories
continue to attract business interest and investment in
customer relationship management (CRM). The CRM
software market is expected to increase from $7 billion in
2000 to $23 billion in 2005, even though conventional
wisdom is that 30 to 50 percent of CRM initiatives fall
short of meeting company objectives, while another 20
percent actually damage customer relationships (AMR
Research 2002). A seemingly myriad of challenges,
conditions and circumstances contribute to the ultimate
success or failure of a CRM initiative. Before investing
scarce resources in such a risky technology innovation,
corporate leadership is calling for a means of decreasing
the sphere of uncertainty surrounding CRM.
The adoption phase (Rogers, 1995) of a technology-
based innovation such as CRM is where decision-making
and planning activities are conducted to address âwhether,
why, and howâ to implement the innovation (Markus &
Tanis, 2000:189). Occurring at project inception, the
associated problems or shortcomings of this phase are
multiplicative, and can exert a toxic effect on the ensuing
innovation process. Although decisions made during this
phase are critical to the eventual success or failure of a
CRM initiative, there is a paucity of research exploring
these adoption issues (Markus & Tanis 2000).
Our research addresses this knowledge gap by
underscoring the criticality of performing a deep analysis
(Parr et al., 1999) of a firmâs readiness to compete based
on CRM. To aid in reducing risk and uncertainty, we
suggest that this assessment provide detailed answers to
two fundamental questions: What is a firmâs current CRM
capability? and What changes must be in place before
embarking on a CRM initiative? In the ensuing
discussion, we address these questions by delving into the
relationships between the concepts of business value,
complementarity, and alignment.
2. Business value, complementarity and
alignment
When considering a CRM initiative, executives
ultimately want to know the impact on organizational
performance â that is, the likely business value of the
initiative. This is typically measured via the return on
investment (ROI) metric. However, determining the
economic value of an innovation, especially one enabled
by technology, has posed major difficulties to researchers
and practitioners for several decades.
Recent literature on business value suggests
complementarity as a key determinant of organizational
performance (see Barua and Mukhopadhyay 2000 for a
summary). Two activities or factors are complementary if
the benefits of doing more of one increase by doing more
of the other (Milgrom and Roberts, 1990).
Organizational alignment is concerned with the level
of agreement between complementary constituent parts
(e.g. people, processes, activities). Alignment research
typically falls into either of two basic dimensions:
intellectual or social (Reich and Benbasat, 2000). The
intellectual dimension, also known in the literature as
strategic alignment, centers on the alignment of
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2. organizational strategy, structures and planning processes.
Here, strategy is the focal point such that positive
alignment can be achieved when organizational structures
and processes support strategy. In contrast, the social
dimension concerns the alignment of organizational
culture, stakeholder interactions and knowledge of one
anotherâs work domain. In this context, culture is at the
nucleus where positive alignment occurs when
stakeholders are knowledgeable about each otherâs
domain areas such that cooperative interaction (as
opposed to conflictive) occurs within the bounds of the
organizationâs norms and values.
Other related research underscores the importance of
alignment between the intellectual and social dimensions.
For example, using general systems theory and chaos
theory as the foundation, (Semler, 1997) presents a theory
of systematic organizational alignment where strategy,
structure and culture are complementary. A harmonious
agreement of these aspects breeds an internal environment
supportive of the organizationâs strategy, by eliminating
internal barriers to cooperation and performance. The
theory outlines six aspects of alignment (process, reward
system, values, norms, performance and environment)
that, if in agreement, should result in positive
organizational performance. As organizational
performance is guided by strategy (Pearce and Robinson
1994), and given that a firmâs leaders develop strategy, it
is the leaders and the roles and processes they prescribe
that largely drive alignment.
Absent from this discussion is the linkage of IT in the
alignment mix. There is a relatively large literature
exploring the strategic alignment of IT (i.e., the
intellectual dimension) with an organizationâs strategy.
This research focuses on the need to align business and IT
strategies such that âbusiness objectives are enabled,
supported, and stimulated by IT strategiesâ (Broadbent
and Weill, 1993). Strategic alignment is conceptualized
along two dimensions, strategic fit and functional
integration, in the strategic alignment model (Henderson
and Venkatraman, 1990). Strategic fit focuses on the
integration of the firmâs external environment (e.g.
partnerships, alliances, core competencies) with its
internal environment (e.g. organizational structure,
business processes, human resource processes).
Functional integration deals with the internal alignment of
organizational infrastructure and processes and IT
infrastructure and processes. This body of research
generally finds that alignment âenables a firm to
maximize its IT investments and achieve harmony with its
business strategies and plans, leading to greater
profitabilityâ (Papp, 1999).
A different slant to the strategic model is provided by
Barua and Mukhopadhyay (Barua and Mukhopadhyay,
2000). They developed a business value complementarity
model, another model premised on the concept that
business performance is directly affected by the alignment
of IT and other complementary factors. At the most
fundamental level, management can choose to invest in
different levels of resources in each of four areas:
business strategies, IT applications, business and
management processes, and incentives/control systems.
Changes in any one of these areas should be accompanied
by complementary changes in the remaining three.
As in the domain of organizational research, the social
dimension of alignment has been studied to a far lesser
degree than strategic alignment, and there is no
comprehensive model in use. However, notable
exceptions exist including Reich and Benbasatâs (2000)
research linking the importance of communication and
shared domain knowledge between IT and business
stakeholders in support of corporate strategy. These
researchers also found that perceptions regarding the
success of IT implementations were a key influence on IT
alignment.
This review points to the importance of IT in
achieving organizational alignment. Hence, we propose
IT as an explicit third dimension of alignment to
emphasize its impact. We suggest that the IT dimension
includes the strategic technology enabler, in this case the
CRM application, the firmâs IT capability, and
specifically its knowledge management capability.
3. A three dimensional alignment model of
CRM readiness
Based on the previous discussion, we developed the
theoretical model of CRM readiness as shown in Figure 1.
Three dimensions of alignment are depicted: intellectual,
social and technological. Double arrows indicate that a
single dimension complements, and therefore, should be
aligned with the remaining two. Additionally, each
dimension is comprised of three complementary
categories, represented as a triangle, where the driver of
each appears at the apex of the triangle. The intellectual
dimension includes the categories of strategy, structure,
and planning. Similarly, the social dimension includes
the categories of culture, stakeholder interactions, and
domain knowledge. Finally, the technological dimension
consists of the CRM application, IT capability, and
knowledge management categories.
Although much extant research has explored critical
success factors for subject areas such as innovation/IT
adoption and diffusion, IS development and
implementation, ERP implementation, and management
of IT, there is a pressing need to synthesize and apply
these and other factors for the particular purpose of
assessing CRM readiness. Table 1 shows prevalent
factors that we suggest are complementary in terms of
CRM readiness. Details of each are presented in the
following sections.
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4. Table 1. Readiness Factors organized by Categories within Dimensions
Strategy
⢠Orientation
⢠Leadership
⢠Mgmt. support
⢠Champion
Structure
⢠Organizational Structure
⢠Business Processes
⢠Incentives and Rewards
Planning
⢠Corporate
⢠Business Units
⢠Information Technology
Culture
⢠Cultural Perspective
⢠Attitudes toward
change, technology,
sharing
Stakeholder Interactions
⢠Dynamics
⢠Involvement
⢠Technological Savvy
Domain Knowledge
⢠Within Business Unit
⢠Across Business Units
⢠Sharing
CRM Application
⢠Scope
⢠Complexity
⢠Customization
IT Capability
⢠Project Management
⢠Skilled Team
⢠Similar Implementations
Knowledge Management
⢠Integration
⢠Data Warehouse
⢠Infrastructure
Technological Dimension
Social Dimension
Intellectual Dimension
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5. 3.1 Intellectual dimension
3.1.1 Strategy. A highly competitive global marketplace
places pressure on firms to reduce costs, while
simultaneously differentiating themselves through
improvements in customer service to gain revenues. The
underlying premise of CRM is: If a firm improves upon
how it manages relationships with its customers, the
result will be evidenced as an increase in firm
productivity and customer satisfaction, leading to better
financial performance. However, firms must avoid
viewing CRM as the solution to competitive pressures.
CRM is much more involved â a CRM initiative should
be conceived of as a corporate strategy.
The customer-related capabilities of a firm are at the
heart of assumptions regarding customer satisfaction,
productivity, and the firmâs financial performance.
According to marketing theory, to be successful an
organization must aim all of its efforts at satisfying its
customers, at a profit â that is, managing customer needs
profitably. This means that organizations must create,
deliver, and communicate customer value more
effectively than their competitors. Organizations that
succeed at such are described using terms such as market-
driven, customer-centric, customer-focused, or customer
oriented. Day (1999:5) suggests that such market-driven
organizations are marked by âa superior ability to
understand, attract and keep valuable customers,â and he
identifies three specific components of market orientation:
(1) an externally oriented organizational culture with a
focus on added value; (2) distinctive capabilities in
market sensing, relationship building, and strategic
thinking; and (3) a configuration that enables the entire
organization to anticipate and respond to changing
customer and market conditions (pp. 6-7). Kohli and
Jaworski (1990) provide further specification, defining
market orientation as the organization-wide generation of
market intelligence, dissemination of the intelligence
across departments, and responsiveness to it.
Concerning IT innovations, Kwon and Zmud (1983)
find that top management support is a key, recurring
success factor. Management support can be defined as
the widespread sponsorship of an innovation. Successful
implementation of an innovation has been found to occur
when top management exhibits commitment to change (in
our context, the CRM initiative) as well as commitment to
the (CRM) implementation effort. Support is evidenced
through commitment of resources such as time and money
for education and training of employees, assignment of
key employees throughout the innovation process, and
money to purchase the technology and support the multi-
year implementation effort. Kwon and Zmud state that
successful IT implementation is more likely to occur
when sufficient organizational resources are initially
directed toward motivating the implementation effort and
then to sustaining it.
The literature also consistently points to the
importance of a champion of the innovation effort. To
qualify as a champion, an employee must be a upper-
level, highly respected individual who actively supports
and promotes the innovation, providing information,
material resources, and political support. As an aid to
success, it is important that the same champion sees the
innovation effort through to completion. In a recent field
study, firms undertaking CRM projects with a dedicated
high-level champion were twice as likely to report that
their project was doing at least better than expected (Yu
2001).
Leadership styles are a key factor when embracing a
new initiative such as CRM. Nguyen-Huy (2001)
identified four change management leadership styles,
including: commanding; engineering; teaching;
socializing; or hybrid. No one type is inherently superior
to another. Much depends on the styles that have brought
success in the organization's past. Also, successful
change leaders have utilized one style during an initial
stage, and changed to a different style in a later stage. For
example, a commanding style may be important at the
outset of a project, to communicate that top management
is serious and committed to the change, whereas a more
collaborative style may be successfully used during
implementation. In the context of CRM, little research
has been done to examine the change management
leadership styles utilized, or to analyze under what
conditions a particular change management leadership
style is likely to be effective.
3.1.2 Structure. The innovation literature suggests that a
firm with a flat, decentralized structure, as opposed to a
centralized hierarchical structure, is most likely to support
the development of innovative ideas. However, with
regard to implementing the innovation, a centralized
structure has been shown to be most effective. In terms of
an IT innovation, structural factors pertain to the
compatibility of the system with the organizational design
(e.g., centralization, decentralization, organic), the
authority hierarchy, reporting relationships and the like.
ERP and CRM efforts revolve around business
processes. Effective CRM must integrate and support the
business processes that create customer experiences.
These business processes span the organization, including
the customer-facing business processes of marketing,
sales, and customer service. However, back-office
business processes such as accounting, purchasing,
production, and logistics are also involved. The
significance of this logical integration of customer related
knowledge cannot be under-estimated. It poses a major
challenge to organizational readiness.
There has been debate regarding (1) whether to re-
engineer business processes prior to proceeding with an
ERP initiative and (2) the degree that business processes
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6. should mirror the âbest practicesâ embedded in the
application software. ERP literature points to the success
of companies who re-engineer processes to mirror the
software prior to undertaking the ERP implementation
effort. It seems reasonable to assume the same applies in
the realm of CRM.
CRM cannot be successful unless customer
information stored in the corporate knowledge bases and
warehouses contains relevant data that is timely and
accurate. To accomplish this requires the cooperation of a
multitude of employees from sales and marketing to those
involved in back-office operations. A pressing problem is
that many employees who have the requisite knowledge
that CRM relies upon do not directly reap the benefits, but
rather only experience the cost of entering their
information into the corporate knowledge bases and
customer repository.
3.1.2 Planning. Planning can be defined as the state to
which a high quality set of connected plans exists,
involving corporate, business units, and IT. The
corporate strategic plan should drive the business unit
plans and IT plans. Researchers have found that IT
executives who participate more in business planning
believe they have a better understanding of top
managementâs objectives than those who participate less
(Lederer and Buryk 1989). Furthermore, an integrated
planning process fosters communication between business
and IT executives, and is important in forging a shared
understanding between different functional areas within a
firm. Support for the importance of connections in
planning is also found in Zmud (1988) who notes that
structural mechanisms (e.g., steering committees,
technology transfer groups) are needed to build IT-line
partnerships for the successful introduction of new
technologies.
3.2 Social Dimension
3.2.1 Culture. The culture of a firm is undoubtedly
central in determining its readiness to undertake a CRM
initiative. Martin (1992) interprets organizational culture
from one of three perspectives: integrated, differentiated,
or fragmented. An integrated culture has a strongly
shared consensus around values, assumptions, and
behaviors. This consensus bestows upon organizational
members a collective identity that guides their work
attitudes and behaviors. Resistance to a new initiative can
be explained by noting its inconsistency with the values
and assumptions of a strong organizational culture. A
differentiated culture is a collection of sub-cultures,
whereby a homogenous culture exists only within each
group. Conflict between stakeholders is attributed as
resulting from incompatible interests. A fragmented
culture is one where contradiction is all encompassing.
Here, the cultural milieu is ripe with ambiguous and
paradoxical symbols and behaviors.
Organizational theory suggests that to the degree a
firmâs culture is integrated and aligned with its strategic
objectives, goals, and expected outcomes (Mackenzie,
1986), the culture will positively impact overall
organizational performance. Various literatures advocate
that an IT-enabled innovation such as CRM is most
successful in an integrated culture with cooperative,
collaborative and trust-based interaction, where
employees are empowered, open to change and have a
positive attitude toward technology, and where
knowledge sharing is the norm.
Successful CRM presents employees throughout an
organization with a consistent, global view of the firmâs
customers. Thus, the best-suited culture is perhaps one
that promotes sharing high-quality customer information
so that a rich customer knowledge repository is
maintained and available to all employees.
3.2.2 Stakeholder interactions. While an organization
socializes employees to assume attitudes and values
consistent with its core culture, differentiation and
fragmentation among various subgroups and
constituencies can exist. A stakeholder is "any group or
individual who can affect or is affected by the
achievement of the organization's objectives" (Freeman
1984: 46). Stakeholder theory views organizations as
composed of sub-coalitions having disparate demands.
A firm is conceptualized as a "nexus of contracts,"
with top managers serving as "contracting agents" who
engage in relationship management with stakeholders.
Adept management of stakeholders gives a firm
competitive advantage: "firms that solve commitment
problems efficiently will have a competitive advantage
over those that do notâ (Jones 1995:404). This awareness
is best accomplished by means of stakeholder analysis â
that is, identification of key stakeholders (or âplayersâ)
within the organization, analysis of the potential role of
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7. each stakeholder relative to the CRM initiative, and
development of a plan for proactive management of
stakeholder relations.
Because a CRM initiative crosses multiple business
units and organizational segments, departmental and
subgroup differentiation can breed conflict that may
substantially hamper or thwart a CRM initiative.
Management must acknowledge the presence of diverse
social, technical, and political subsystems, as well as their
diversity of goals, attitudes, and allegiances (Fuller et al.,
1982).
3.2.3 Domain Knowledge. In the CRM context, shared
domain knowledge refers to the knowledge that customer-
facing business units have with respect to one anotherâs
business missions, objectives and plans (Reich and
Benbasat, 1996), as well as their global understanding of
the firm. Similarly, it also refers to the knowledge that IT
executives possess with respect to functional knowledge
of business units as well as to global knowledge of the
firmâs operations. Reich and Benbasat (1996) find shared
domain knowledge to be an influential antecedent to
communication and alignment (Reich and Benbasat,
2000), suggesting a need to investigate the ways in which
shared domain knowledge is created.
3.3 Technological Dimension
3.3.1 CRM Application. The commercial development
of CRM software, following on the heels of large-scale
ERP systems, drives and enables CRM as a business
strategy. Third-party CRM software packages offer a
âcomprehensive set of technologies for managing the
relationships with potential and current customers and
business partners across marketing, sales, and customer
service, regardless of the communication channel
(Greenburg, 2001:16).
Resulting from a variety of catastrophic ERP
implementation failures, research on ERP systems points
to the need to reduce application complexity. The
likelihood of success is related to reduced project scope,
complexity, and customization of the application.
Defining a reasonable (i.e., smaller) system scope by
phasing in software functionality over a series of
sequential implementation phases is an important means
of decreasing complexity. Similarly, reducing or
eliminating customization of the specific functionality of
CRM application software is critical to lowering risk. It
is the business needs that should determine the CRM
application functionality -- the scope of functions to be
implemented. Firms are finding that implementing CRM
functionality beginning with quick, clear-cut and
profitable âhitsâ helps to insure the initial success, and
thus long-term success of a CRM initiative.
3.3.2 IT Capability. Factors that have been specifically
tied to the success of ERP implementations include
project management (project methodology with clear
milestones, appropriate training of users and the project
team) where a multi-skilled project manager possesses
expertise in technical, business, and change management
areas. Research indicates that a balanced team composed
of experts from business units and IT, as well as third-
party experts such as consultants and vendors is critical.
An experienced, highly skilled and empowered project
team is fundamental (Parr et al., 1999). Additionally,
expertise in terms of comparable (e.g., size, complexity,
similarity) implementations including previous attempts
at CRM (e.g., departmental level applications such as
sales force automation) is especially helpful.
3.3.3 Knowledge Management. A key asset and
resource of an organization is the knowledge it possesses
(Drucker 1993). Knowledge management is the process
of managing (e.g., capturing, representing, and making
available) the intelligence and expertise resident in an
organization (Nonaka, 1991; Quinn et al., 1996), Tiwana
2000, Stefanou et al., in press). According to Romano
(2000), companies need to explore and refine CRM
knowledge management methods in order to get value-
added knowledge for themselves and their customers.
To realize this value in a customer-centric context
requires the integration of customer data and knowledge
throughout an organization. This involves integrating
business processes, front and back-office application
systems, as well as on-line and off-line customer
touchpoints (Tiwana 2000). Mittal (2001) states that the
effort requires identifying, collecting and integrating
various forms of often-disparate data into knowledge
warehouses. This necessitates integration of operational,
marketing, customer, and survey data, internal metrics
and marketing intelligence of the industry, competitors,
and customers.
Data warehouse capabilities are a critical enabler of
knowledge management. Data structures, standards, and
models are necessary to support the requisite organization
of data in the corporate knowledge repository.
Fundamental to these capabilities is the technology
infrastructure within a firm. The essential CRM
infrastructure includes communication networks, data
warehouses, computing platforms, and web servers, all of
which should seamlessly work together.
4. Summary
Organizations pursue a CRM strategy for the purpose
of increasing business performance and value. However,
firms face a multitude of organizational challenges
associated with this endeavor. To reduce their risk of
failure, it was suggested that firms undertake a deep
analysis of organizational readiness prior to committing to
a CRM initiative. A model to assess readiness was
developed based upon the premise that business value is
enhanced through the alignment of complementary factors
occurring along three dimensions (intellectual, social, and
Proceedings of the 36th Hawaii International Conference on System Sciences - 2003
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8. technology). Throughout this discussion of
complementary factors, states of being (i.e. properties)
have been proposed as favorable, benefiting or enhancing
organizational CRM readiness. These are summarized in
Table 2.
It is anticipated that, at a minimum, an organization
can benchmark its capacity for CRM against the proposed
states of the alignment model in the nine readiness
categories (within each of the three dimensions). In this
manner, a sort of scorecard approach can be used to
assess readiness, the degree of change required to become
ready, and the associated risk.
However, it is anticipated that significantly more
predictive power can be achieved through the refinement
of this model, as, hopefully, relationships between
proposed complementary factors both within and across
categories and dimensions are discerned. It is anticipated
that these relationships are driven by goals and held
together by something akin to themes. For example, the
goal of attaining a global view of the customer is of
paramount importance to firms operating in the
international marketplace. In this realm, one may uncover
complementary relationships organized around the theme
of integration. The literature points to the importance of
shared knowledge in achieving this global customer view.
However, to foster shared knowledge, business processes
and planning functions must be integrated, disparate
technologies and software platforms must be integrated,
and then, of course, the organizational culture must
support knowledge sharing such that stakeholders will
rally behind the integration effort.
5. Future Research
Currently, we are evaluating the content validity of the
readiness model by conducting field interviews of
multiple stakeholders in CRM initiatives from three
industrial organizations. The purpose of these interviews
is to (1) gather expert opinions regarding readiness factors
from the practitioner community and (2) compare these
with our model to insure its completeness. We will then
use this model as a basis to develop (where necessary)
and apply (pre-existing wherever possible) reliable and
valid measures in the creation of a CRM readiness survey
instrument. We intend to use this instrument to
benchmark firms within a single industry in order to
discern the more intricate relationships between and
among readiness factors, searching for those
combinations that have the greatest impact on business
value and performance.
Acknowledgements:
This research was partially funded by a grant from SAP
America, Inc.
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Proceedings of the 36th Hawaii International Conference on System Sciences - 2003
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10. Table 2. Properties of Complementary Factors expected to enhance Readiness
INTELLECTUAL DIMENSION
Strategy
Orientation Customer-centric; market oriented
Leadership Visible commitment of top echelon
Mgmt Support
Commitment of resources for employee educatoin and training; assignment of
key employees throughout CRM process; money for technology and multi-year
implementation effort
Champion
Use the same high-level person throughout the project and dedicated him/her
full-time
Structure
Organizational Structure
Centralized structure to implement; CRM compatability with org'l design,
authority hierarchy & reporting relationships
Business Processes
Logical integration of customer-related knowledge; processes re-engineered to
mirror CRM application 'best practices'
Incentives & Rewards
Reward employees that bear the cost of CRM (i.e. Updating knowledge
repository)
Planning
Corporate, Business Units, and IT Integrated, connected and established planning process
SOCIAL DIMENSION
Culture
Perspective Integrated (shared values and behaviors), cooperative, and trust-based
Attitudes Open to change, positive attitude towards technology
Empowerment Employee empowerment is the norm
Stakeholder Interactions
Dynamics Identification and awareness of CRM stakeholder dynamics
Involvement Inclusion of stakeholders in CRM planning efforts
Technology experience Technologically savvy stakeholders
Domain Knowledge
Within business units Enhanced depth of knowledge
Across business units Enhanced breadth of knowledge
Sharing Willingness to share knowledge
TECHNOLOGY DIMENSION
CRM Application
Scope and complexity Reduced functionality; phased implementation
Customization Reduced or eliminated
IT Capability
Expertise
Project management experience; balanced team of experts; experience with
similar installations (e.g. ERP, SFA)
Knowledge Management
Integration Global view of customer
Data Warehouse
Pre-existing data structures, standards, and models built into corporate
knowledgebase
Infrastructure Communication networks, data warehouses, computing platforms, web servers
Proceedings of the 36th Hawaii International Conference on System Sciences - 2003
0-7695-1874-5/03 $17.00 (C) 2003 IEEE 10