by John Sviokla and Audris Wong

The Value of CRM Is Not In Micromanaging

Apr 01, 20036 mins
CRM Systems

As pitched by vendors, customer relationship management technology is a control freak’s dream. CRM systems promise executives every last excruciating detail on sales-force activity, customer service transactions and customer behavior. Vendors also claim CRM systems will provide executives with an X-ray of organizational activity, giving them the control they crave over every action inside the company while delivering a clear view of the sales pipeline for the next quarter. What executive could resist such a tempting promise? But CRM?when implemented primarily to satisfy control-hungry executives?will fail. Indeed, most CRM systems are failing. That’s because no amount of information, no matter how detailed, will ever make customer interactions controllable.

So, is CRM good for anything, or have all those companies that implemented the technology just wasted their money? It turns out that CRM can provide real, significant value, but it has to be implemented in partnership with a cultural commitment. This means that executives have to loosen the reins of control; they must see CRM as a tool to empower frontline workers and not as a means for keeping tabs on salespeople.

Signs of Success

There have been a number of successful CRM implementations, and they often share the same four elements. Companies that have implemented CRM to their advantage use the system to meet key customer needs. Those companies also derive in-depth analysis of customer costs and potential profit from their CRM systems. In addition, CRM works best when used to link information from disparate business units or eliminate information silos. And finally, CRM is successful when companies redesign organizational incentives and structure to empower those employees who are closest to the customers.

One company that has successfully implemented customer relationship management, albeit in a defensive maneuver, is Fidelity Investments. By the early ’90s, Fidelity had grown into the largest and most successful mutual fund company in the world. Upstart Charles Schwab, however, created OneSource, its one-stop fund supermarket. Fidelity was flabbergasted.

Schwab was stealing customers by putting itself between the customer and the fund providers. CEO Edward Johnson, the son of Fidelity’s founder, felt that OneSource was not just a clever service but a harbinger of a fundamental shift in customer behavior?from product-centric to relationship-centric.

To counter Schwab’s move, Fidelity didn’t begin by purchasing CRM technology; the company started with an extensive analysis of customer needs as they related to a fund supermarket. Then Fidelity changed the very basic concept of customer from that of “fund owner” to “household.” This seemingly simple mind-shift necessitated an activity-based costing effort to discern the true cost-to-serve for each household segment across Fidelity’s service channels. Fidelity switched its metrics as well. Instead of concentrating on whether the number of accounts or customers was on the rise, Fidelity began looking at the total value or worth of a customer if she were to have all assets under management.

In order to support this cultural and customer shift, Fidelity drove extensive systems design and building down to the frontline level. The goal was to provide those employees with an integrated view of the customer. Fidelity also created service teams that were tiered by household wealth; representatives on the phone knew the total customer relationship. Incentives were shifted away from simple market share goals by product, to more comprehensive targets that aimed to give compensation to employees for achieving an increased share of investable household wealth.

Fidelity’s effort was not driven initially by the desire to acquire a hot technology; it began with a customer need. Fidelity then followed up with analysis and the creation of the necessary technology infrastructure to enable an information flow to support the new view of the customer. Finally, the company demonstrated a willingness to change the organization and implement internal controls to cement its new orientation. At no point was Fidelity’s CRM effort motivated by the whims of a control freak.

Industrial Strength CRM

Unlike a financial services company that has to contend with fickle customers, one might reasonably think that CRM would be irrelevant to GE Aircraft Engines (GEAE), a company with only two customers (Boeing and Airbus) and sales?in a good year?of a few thousand units. Analyzing such a level of customer and sales data could easily be done with little more than a 3-by-5 index card, a No. 2 pencil and an abacus. Yet, GEAE uses CRM technology to rethink its offerings.

Decades ago, the airlines encouraged engine manufacturers, including GE, to create systems that enable remote monitoring of engines. Over the years, this simple request has blossomed into an entire operating system for engine control. If you’re sitting on a newer plane with a GE engine, or a plane with a replacement unit from GE, that engine has an onboard computer collecting thousands of readings from hundreds of sensors while in flight. The data is relayed to a satellite on its light-speed trip to Glendale, Ohio, just north of Cincinnati, where it enters the GE Applied Statistics Lab. For the past 25 years, GE has combined this focus on technology with an organizational investment in knowledge to create the world’s leading center for applied industrial statistics. This group turns the torrent of data into dollars by understanding its own product and customers’ needs better than its competition.

GE does not simply use this information to control the engineers and maintenance workers in more detail. Instead, it encourages the technical and financial groups to work together to win business. Like Fidelity, GEAE has changed its concept of customer needs. The company has moved from selling engines to selling capability-power by the hour. In this marketing approach, GEAE assures a certain level of available power to the customer’s fleet. In addition, its sales force uses detailed information about the cost to serve each particular engine to tailor support services based on a customer’s specific operational, financial and maintenance requirements. GEAE, like Fidelity, is motivated to use CRM to provide customers with the services they want.

Those companies that use CRM technology to satisfy the cravings of control freaks are bound to waste their money and time. Successful CRM efforts?those that have delivered value for both consumer and industrial companies?start with a new concept of the customer and then drive organizational capability to meet the needs of that new concept. Forget about using CRM to keep watch on your employees or collect every last minutiae of information. Instead, use CRM to analyze profits, distribute relevant information to the right people and reshape the organizational structure to deliver the products and services that your customers really want.