Ready or not, welcome to the Customer Age. Customers have more choices than ever before, thanks to a global economy that pumps out high-quality goods and services, with a helping hand from the Internet to ensure competitive prices. (Unless you're dealing with Microsoft software or the California energy market, but that's another story.)

That's why, over the past decade or so, we've seen a shift to Customer Relationship Management (CRM)—a business strategy to get, grow, and retain the right customers. Increasingly, it's not what you sell, but how you treat your customers that will determine your long-term success. Even in these uncertain economic times, analyst firm Aberdeen Group says that CRM-related software, services, and hardware spending will grow from about $13.5 billion in 2001 to $15.3 billion in 2002, and continue at a compound annual growth rate of 20 percent through 2005.

Dog-Eat-Dog or Better Relationships?

That's a whole lot of moola supposedly chasing better relationships. Are they getting any better? I'm not so sure.

Consulting my friendly dictionary, I found that "relationship" means "being mutually interested or involved in social or commercial matters." Let's say you're a manufacturer and want a better "relationship" with your component suppliers. You might spend money on Supply Chain Management (SCM) software to cut cost and delivery times. But your suppliers see you as their customer, so they'll probably invest in a Customer Relationship Management (CRM) systems to increase revenue and profits from you.

Therein lies the problem. Too often buyer and seller are trying to get the upper hand and increase their profits at the other's expense. This is a dog-eat-dog, win-lose transaction, not a relationship. Would you ever attempt to "manage" the relationship with your spouse? Not unless you like walking with a limp, you wouldn't.

Done right, CRM should be about both receiving and delivering value. But mostly this over-hyped buzzword been about controlling the other party and extracting as much value as possible. It's no wonder that true CRM success stories are few and far between.
 

It's the Value, Stupid

According to an Insight Technology Group study in 2001, over 52 percent of firms bought CRM applications without first planning how they were going to generate a return on that investment. Not surprisingly, 76 percent of those same companies reported minimal or no improvements. Other studies have found failure rates of 50 to 80 percent, depending on how "failure" is defined.

Some projects fail, as Jeff Sweat explained in When CRM Failure Isn't, because of mismatched expectations—people in IT, marketing, sales, and customer service all thought they were getting something different. And, as we found in our CRM software satisfaction study, some CRM software reps over-promise and under-deliver on what their technology can do. (No, really, it does happen!)

Then again, maybe it's the CEO's fault for not supporting the project strongly enough. Or not investing in a change management program. Or not defining ROI metrics ahead of time.

Meanwhile, while we're playing the blame game internally, we've forgotten the most important party of all. You remember, the one that pays the bills—the customer. I think the reason CRM fails is pretty simple: lack of customer benefits. If we learned anything from the debate about customer loyalty earlier this year, it's that real loyalty is built by the total value the customer receives—the product, service, price, and communication. You have to earn loyalty by delivering more value than your competitors. Then you've got a relationship worth managing.

So maybe, despite your purchase of a nifty neato CRM system, the reason your customers don't deliver value to you is because you don't deliver value to them.

Philosophically, collaboration is a different story because it's about "we," not just "me." To collaborate, after all, means to work together, with both sides investing in the relationship and benefits flowing both ways. A collaborative (win-win) mindset, supported by the right processes and systems, is what's required to make CRM work.

Partner or Perish

The conventional wisdom a couple years ago was that the Internet would enable companies to directly sell to and service all of their customers. Yet indirect channels remain of vital importance in reaching target markets, adding consulting and services, and providing total solutions. Think about it: The last time you bought a car, you could've done so online. Did you? In fact, globally about 40 percent of business is done through intermediaries (channel partners) of various sorts, including distributors, retail stores, resellers, agents, and brokers, just to name a few. Some analysts predict that the percentage of indirect commerce will actually increase to as much as 60 percent over the next decade or two.

The real payoff of the Internet is its enabling of business collaboration—sort of "information partnerships" between manufacturers, partners, and customers. Michael Dell, in his book Direct from Dell (HarperCollins, 2000), said "the Internet as a sales channel represents only a fraction of the Internet's value to business. The real potential lies in its ability to transform relationships within the traditional supplier-vendor-customer chain."

Agreeing with Dell's viewpoint, GE's former Chairman Jack Welch said in Jack: Straight from the Gut (Warner Books, 2001), that creating a "boundaryless" company was a core part of GE's value system. In his view, a boundaryless company would "remove all barriers among the functions: engineering, marketing, manufacturing, and the rest," and also would "knock down external walls, making suppliers and customers part of a single process."
 

Cisco Systems' efforts to create a "virtual enterprise" are well chronicled. "Barriers to information in Cisco are incredibly low," says Ran Kelsi, London-based head of Strategic Initiatives EMEA for Cisco Systems. "We've been successful in opening up the guts of our organization as much as we can to our customers. They can deal not only with the front office, but gain access to knowledge and information they need at a particular point in time. This eliminates bottlenecks, and we expose the internal value chain to external customers."

Improving collaboration with partners isn't optional anymore. Economic pressures are driving this trend, according to Karen Smith, Aberdeen's CRM Research Director. "A slow economy increases the premium placed on additional revenue-building channels. As a result, a growing priority among enterprises is building superior partnerships that can help differentiate and sell their product lines through value-added services; a wider selection of related products; and relevant, local expertise."

In short, you can't afford to do it all yourself. So don't.

Shift from Automation to Collaborative eBusiness

In the past decade, businesses have invested in a proliferation of enterprise software applications: Sales Force Automation (SFA) applications for the direct sales force; Customer Service & Support (CSS) applications for the customer service department; and Partner Relationship Management (PRM) applications for indirect channels. By and large, these systems automate business processes with the goal of extracting more value from customers and partners. To make matters worse, according to an InformationWeek study, only 17 percent of businesses integrate their call centers, Web, and email systems with each other, making it impossible to create a complete picture of the customer.

For a sustainable competitive advantage, companies must move beyond the easily duplicated automation projects. In the future, advanced "collaborative e-business" systems will connect the enterprise with its customers and partners, enabling the seamless exchange of information that was Jack Welch's vision at GE. These solutions will ensure that the enterprise, partners, and customers can all work together in a profitable relationship network.

As the diagram shows, traditional CRM is shifting outside the enterprise. Emerging Web Services standards will play a starring role in the next wave of collaborative CRM solutions, enabling true "plug and play" process integration while handling both structured and unstructured information.

• Drive everything from a customer perspective. Start from the very top of the business. Check your ego at the door; act like you work for your customers and partners, not vice versa. If you're not delivering value, don't start the project.

• Dare to share vital business information with partners and customers. Work through inevitable security issues and occasional missteps. While you're learning, however, be smart about the risks you do take.

• Think, plan, and then do. Focus on business problems and processes that are truly critical to the success of customer and partner relationships. Assess the impact of process gaps between your enterprise and your trading partners.

• Motivate and monitor adoption. You'll need to work hard to encourage customers and other stakeholders to use new systems supporting relationship networks. Keep at it—you'll never be completely done.

• Remember, it's still about people. At the core of successful relationships, networked or otherwise, are real people of flesh, blood, and emotions whose main question is: "What's in it for me?" Better have an answer ready.

In the collaborative future of CRM, customers will reap rewards by receiving the products, services, and interaction experiences that they want, at an affordable cost. Partners—true value-added intermediaries—will earn the loyalty of both customers and suppliers. And the enterprise will gain the sustainable competitive edge it needs to win in the Customer Age.

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by Bob Thompson
President of Front Line Solutions and founder of CRMGuru.com, an industry expert on Partner Relationship Management and Collaborative eBusiness technologies. For more information visit http://www.frontlinehq.com

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