"The term CRM is now broad enough to warrant a seat at the strategy table, but it is still too ill-defined to be more easily turned into action. Integrating the firm around the customer, rather than around the product, will be a challenge for most firms for some time to come. "

CRM Is Mature

Now mainstream, CRM is widely recognized as a key strategy as well as a rich collection of technologies. Despite vendor consolidation, IT leaders still have a broad range of technical options from which to choose. Firms are now moving beyond overcoming the technical hurdles to solving basic and profound business problems.

The CRM Landscape Is Changing

With millions of blogs, billions of blog messages, and millions of consumers-as-authors, Web 2.0 has arrived. Wireless technology, despite adoption hurdles, is advancing. It is no longer a question of whether we can analyze customers, but with what model. CRM tactics will need to quickly and intelligently leverage these changes.

Opening Statement

The class of software and hardware technology known as customer relationship management (CRM) is getting downright boring. Or perhaps more accurately, it is now fully mainstream. Just as the Internet breathed some life into the business intelligence space, the Internet initially gave rise to an explosion of vendors and solutions under the CRM banner. In the last few years, the number of vendors has winnowed and the categories of solutions within CRM have stabilized.

As a business strategy and a way of organizing the firm around the customer, however, CRM is still new, with many opportunities ahead. As our authors in this issue point out, many firms still struggle with business process coordination and strategy setting with both the old and the new CRM concepts. While we have more mature technology now than we did a few years back, we still have not been able to fully utilize it for advantage. To see why, let's break the larger concept of CRM down into its component parts:

1. The set of technology underlying CRM

2. The set of business processes that leverage CRM technology

3. The business strategy that drives CRM initiatives

CRM AS UNDERLYING TECHNOLOGY

The set of technology underlying CRM is actually quite large, normally aligning with core business functions that seek to understand and serve customers, such as marketing, sales, supply chain management, distribution and logistics, and customer support. These business functions have numerous ways of communicating with the customer, among them face-to-face meetings, phone (mobile and fixed), e-mail and IM, the Web, broadcast and print media, and word of mouth.

Unsurprisingly, software vendors have produced a large number of solutions across the business function and communications channel dimensions, as well as a plethora of industry-specific solutions. Today a large software vendor like Oracle has hundreds of solutions that fall in the CRM category. Understanding this breadth is daunting. Further complicating things, enterprise resource planning (ERP) frequently overlaps CRM, while CRM analytics overlap with data warehousing and business intelligence. It is difficult to know where one category of software begins and the other ends.

Despite the fragmentation and recent consolidation of the software industry, all of this complexity is symptomatic of the maturation of CRM technology. On the whole, it is a healthy sign.

CRM AS BUSINESS PROCESSES

As a set of business processes, CRM poses challenges. In the 20th and now the 21st century, most firms have been organized around a singular core competency: producing and delivering products and services. Historically, firms found advantage in manufacturing expertise, associated patents, and locking in sources of supply to prevent competitors from getting their "secret sauce." However, with the rise of globalism and worldwide excellence in manufacturing, the ability to sustain competitive advantage in this manner is slipping away. Cost pressures have resulted in product and manufacturing expertise growing elsewhere, and the Internet has accelerated this transition.

It is little wonder that so many firms, faced with shrinking profits from the pure product side of their total offering, have renewed their focus on the service component (marketing, sales, customer support, add-on consulting, etc.). The theory is that firms can continue to justify their product offering's price in the market with value-added activities within the service component of the offering bundle. Firms are finding, however, that their capabilities in these areas frequently lag behind their optimized manufacturing capabilities.

Enter CRM. CRM promises to allow the firm to speak with one voice to the customer through superior knowledge of and improved interactions with each customer, even down to the level of one-to-one personalization. If the total customer experience can be enhanced, perhaps customers will be more loyal (creating additional profits) and willing to pay a higher price. The challenge is that most firms are organized around creating and logistically delivering their offerings. It is much easier to identify accountability for a failed product than it is to identify accountability for a failed customer relationship.

Even with global outsourcing of manufacturing capabilities, integrating manufactured items (or services) into new bundles and delivering them to markets is difficult. A product-centric organizational structure is still necessary. How, then, do firms build an organizational structure for delivering delightful customer experiences?

The answer lies in business process integration within the firm. All units that interact with the customer need to have a common set of information, well-orchestrated handoffs between units, and good alignment and incentives between units to ensure that everyone is working toward one common, customer-centric goal. Firms that can integrate themselves and deliver better customer experiences can potentially create a very sustainable competitive advantage.

CRM AS STRATEGY

The third aspect to CRM is strategy. This is often less difficult to address, as firms exist to serve customers and rely on continued revenue streams from existing and new customers. Convincing executives that their firms need to become more customer-centric is easy.

Settling on the strategy for doing this, however, is often less than obvious. Things change. Firms' knowledge of their existing and potential customers is imperfect. Competitors come from places firms least expect. This level of dynamic change in markets can quickly render the most well-thought-out plans obsolete. At some point, firms may have to jump in and learn by doing rather than try to develop a more detailed strategy. This favors incremental approaches, even if the firm envisions large shifts in strategy.

Nearly every firm I have worked with or studied has taken an "inside-out" approach to CRM strategy, looking inward and reasoning about what to do with customers based on current knowledge and beliefs. In many cases, business leaders are defensive about altering the current customer strategy, because doing so is threatening. New knowledge about their inadequacies in serving customers may raise questions and alter power relationships within the firm. The next time you participate in a CRM strategy session, count the number of minutes spent discussing the customers and their problems as compared with the minutes spent discussing the firm's internal problems.

THE CURRENT -- AND FUTURE -- STATE OF CRM

If one considers CRM as software, it is clear we have come a long way. CRM as strategy can be challenging, but firms can and occasionally do develop good customer-centric strategies. CRM as business processes still lags, I contend, and sometimes rather significantly. This month's authors survey the current CRM landscape on all three fronts and suggest possible future directions.

First up, Leslie Jump has contributed a provocative piece on Web 2.0 and CRM. Millions of blog sites are up, billions of blog messages are being posted -- the blogosphere is simply too large to ignore. So savvy marketers are beginning to marshal the energies and passions of customers themselves in a phenomenon known as "consumer-generated marketing." In a way, this is a logical extension of CRM: the customer is directly involved in creating and designing his or her own experiences. We were taught, way back when, that companies are supposed to produce something (products, services) and sell them to customers. In Web 2.0, Jump argues, "we open companies and marketing processes to the experiences of thousands of micro-segments of participants, actively listen to where and how they participate, and harness that collective intelligence and passion to create products, services, and brands."

Next, Bill Nowacki points out problems with conventional transactional analysis of CRM data and argues for a collection of metrics that he describes as customer "capacity." Nowacki breaks capacity down into three concepts: the ability of the customer to participate in a relationship, the relevant time windows for participation, and the available buying power the customer has. To adequately describe a customer's capacity, CRM systems will need smaller, more focused, and highly automated analytic models instead of the current vertical industry-centric models they tend to have today.

Raymond Pettit agrees that conventional transactional or behavioral analysis of CRM data poses problems. He lobbies for not only measuring the full customer experience across all key touchpoints, but also measuring more stable and enduring concepts. Pettit urges the CRM world to return to some of the roots of marketing analytics. These roots are in the soil of organizational psychology, anthropology, social science, and psychology. Understanding motivations, intentions, and preferences may be more valuable than understanding the customer's last set of transactions.

Next, Brenda Lewis reviews the recent growth and interest in wireless CRM, but points out some key barriers to future adoption. Technical complexity, multiple wireless network frequencies, diverse authentication systems, and the need to better manage lost devices are key areas needing improvement. Moreover, most research and development dollars are spent by the telecommunications industry on consumer devices. Business needs are more varied, more tailored, and still underdeveloped. Lewis suggests that firms focus on a mobile device strategy before they focus on a wireless CRM strategy. This could be a ripe opportunity for smart wireless integrators.

Most discussions on CRM tend to focus on the business-to-consumer (B2C) arena. Business-to-business (B2B) CRM is perhaps more intricate and more difficult to manage. Andy Drefahl argues that IT is the natural integrator of the parts of the firm that must collaborate to manage CRM initiatives well, but in order to effectively contribute, IT will need to become more knowledgeable about a firm's customers and engage the customer-serving units in a coherent dialogue. Drefahl points out that IT leaders will need to help push forward a CRM strategy that fosters innovation, deepens understanding of customer loyalty, advances integration of the customer experience through systems and data, and ties in well with strong quality and program management frameworks. This is a tall order for any business leader, much less an IT leader. Some help may be found in matrix leadership structures and more clever ways to map out the strategy in visual ways and communicate it clearly across the firm.

Mergers and acquisitions (M&As) will always be with us. In our last article, Mary Elizabeth Ferraro discusses the role of CRM in M&A activities. CRM interaction services, which generate useful data beyond total sales, and CRM analytic systems, which can turn this data into something meaningful, are necessary and useful systems to have in place to help guide M&A decisions. For firms wishing to pursue active M&A strategies, CRM systems can help with decision making and, more importantly, managing customers during the transition.

ONWARD

Some common themes emerge from this diverse set of viewpoints regarding CRM. First, several authors clearly agree that the full customer experience is the proper domain for CRM as a business strategy, a set of business processes, and a set of technology. CRM extends beyond transactional and even interaction data to data that describes the mindset of the customer. In this regard, CRM is still profound. Second, deciding how and where to apply CRM technology is still difficult. What types of data firms choose to integrate, how firms decide to build their analytical models, and how they should approach Web 2.0 are all issues that must be addressed. In a way, this bodes well for CRM as technology. We are moving past the implementation concerns and are well into the nuances of applying the technology properly. Third and last, CRM is diversifying rapidly. This issue gives us only a very small peek into the breadth of issues that CRM as strategy, process, and technology attempts to cover. One could argue, as I will, that the term CRM is now broad enough to warrant a seat at the strategy table, but it is still too ill-defined to be more easily turned into action. Integrating the firm around the customer, rather than around the product, will be a challenge for most firms for some time to come. IT leaders will need to continue to understand the strategy and business process nuances within CRM to ensure successful management of CRM technology investments.

ABOUT THE AUTHOR

Vince Kellen is the VP of Information Systems and a member of the faculty of DePaul University. Prior to joining DePaul in 2003, Mr. Kellen served as a business strategy and IT consultant for several large and midsized companies, including 20th Century Fox, Exxon/Mobile, General Mills, SC Johnson, Arthur J. Gallagher Insurance Co., and R.R. Donnelley. He has spoken nationally and internationally on CRM, knowledge management, and information visualization. Mr. Kellen has written four books on database technologies and numerous articles on technology topics. He lectures on enterprise architecture, CRM technologies, and distributed systems and is currently researching the impact information visualization has on decision making. Mr. Kellen can be reached at vkellen@depaul.edu.