A recent BBC current affairs programme focused on the changing attitudes to customer service. The theme was that customers in the UK are increasingly expecting to be served well - and when they encounter poor service, they tell lots of people. That is nothing new, but where there is a trend towards commodity products, often service is the only differentiation between brands. Indeed one industry analyst interviewed for the programme suggested that some well-known High Street brands might disappear through poor service. Being a consumer-oriented programme, naturally it focused on Retail companies. However, it does serve as a guide to individuals' expectations of service. If a corporate buyer expects good service in a department store, why shouldn't he also expect good service from his corporate suppliers? With the increasing globalisation of business, service will often become the differentiation between manufacturers.

Small wonder that a survey by Forrester Research showed that 45% of Global 3500 firms are considering Customer Relationship Management (CRM) projects, and 37% have installations under way or complete. Leading CRM vendor, Siebel, grew revenues by 121% during 2000. All seems fine in the CRM market. Except that this year cracks are starting to show - Scottish CRM vendor Quadstone recently announced 80 redundancies and Nortel looks set to offload CRM vendor Clarify after a year of unprecedented losses. So what is going wrong?

The simple answer is that improving customer service is not just a matter of installing software. If you install software to speed up and automate existing business processes, customer service is only improved if the existing processes are customer-focused. Often, in many companies, business processes for customer-facing activities are not even well-defined, let alone best practice.

It's worth pointing out that CRM is still a relatively young technology - it's still at the stage where vendors have been installing it in the easiest places. Controlled environments with well-defined business processes are where CRM has been most successful. Call centres are the best example. They require defined business processes that cover the routing and handling of calls. They tend to be tightly-controlled environments, where operators are closely monitored - often with the calls recorded. CRM systems aid the routing of calls and help the operators by providing them with all the information they need about each customer on one screen. This adds up to a situation where the operators input data for two good reasons - firstly, they get access to the data quickly next time they need it - and secondly, they can be compelled to use the system in the controlled environment of the call centre.

Even call centres often miss the opportunity to use technology to help improve customer service. Instead, companies used the technology to make call centres more efficient - i.e. less expensive. Now customers that used to be able to phone their friendly local branch have to phone an anonymous central call centre instead. If the customer then gets exactly the information they needed, that isn't a problem, but often customer service is second-best to the drive to keep the average number of calls answered up to par, or the number of calls in the queue below guideline levels. These are not technological or software problems, they are business problems. The fact remains that given best practice business processes, CRM in call centres works well.

Problems arise when you try to take CRM into more complex environments, such as a manufacturing company's sales and support teams. Typically, there are many different contact points with the customers, from direct sales, through customer service to partners. Many different types of communication are used - some face-to-face contact, lots of phone and fax, with some e-mail and EDI thrown in. Often the method of communication will differ from customer to customer. For CRM to really work all those contact points need access to the CRM system regardless of the type of communication used. More importantly, each user needs to perceive a benefit to inputting data.

Furthermore, the business processes that the CRM systems are intended to automate are less well-defined than in a call centre environment. Any CRM project needs to not only include business process re-engineering, but the re-engineering needs to happen first.

In relatively mature software solutions, the business processes modelled by the software are reasonably well-established and relatively close to the needs of the target customers. ERP vendors have developed editions of their software solutions for particular industries. These industry-specific solutions typically require less customisation than generic solutions. The CRM market is still relatively immature and the procedure of matching of business processes to industry best practices is far from complete. Any CRM implementation is faced with a significant problem - the existing business processes almost certainly need changing, but the business processes that would allow a vanilla implementation of the software are almost certainly inappropriate for the company in question. The simple answer is some expensive business process re-engineering, followed by some expensive software customisation. Given the current economic climate, that's not an answer many companies will like.

Where companies have already implemented CRM, the return on investment is often not what had been anticipated. Cambashi has heard reports of companies being unable to persuade their sales force to use the Sales Force Automation (SFA) module of their CRM system. Unlike call centre staff, field salesmen have no incentives to use the system. Many see their contacts as their major asset - subsume a salesman's contacts into the corporate system and he becomes just another salesman. For the salesman, his defence against being replaced has disappeared.

Call centres can insist that staff use the system - it's more difficult for a manufacturing company to insist that their star salesmen use the SFA system. Indeed, the burden of data input may even reduce the efficiency of the best salesmen. The goal of a good SFA system is to make all salesmen as efficient as the best salesman. Unfortunately the reality is all too often that SFA systems make all salesmen into average salesmen.

At the Cambashi Annual Seminar in April, we talked about the hype and hysteria generated by application areas like e-business, supply chain management and CRM. In many ways, CRM is becoming a victim of its own hype. As customers are demanding better service, companies are realising they need better customer-facing systems. Coupled with the hype around CRM in the media, the take-up of CRM has been phenomenal. This rapid take-up has meant that vendors have not had time to tailor their systems to their customers' requirements, leading to expensive implementations, which in turn lead to increased expectations. As 'early adopters' the customers lack the sort of rich functionality they expected from a technology they thought was mainstream. Disappointment is the result.

Vendors are spending millions improving their solutions - Siebel alone spent $145 million on research and development. As the solutions are rounded out, with features that encourage customer-facing staff to use the system, companies will begin to reap significant benefits from CRM implementations. Indeed, some observers believe that companies that do not address their customer-facing systems are likely to struggle to survive beyond 2010.

Companies that are addressing their customer-facing systems should certainly begin with business process re-engineering - and only then start looking for software systems to support those processes.

Dan Roberts

Article first printed in Conspectus, October 2001

Also of interest:

Review of the enterprise applications market at the 2002 Cambashi seminar

CRM Return on Investment article

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