Vertical CRM: It's No Panacea

CRM consultant Douglas Turk, in a recent interview with Computerworld, explains the drivers behind the "verticalization" of CRM, the downsides and why so many CRM projects fail. Turk is an executive vice president at the Chicago-based consultancy Inforte Corp., and co-author of CRM Unplugged (John Wiley & Sons Inc., 2004).

Why is there a trend toward CRM verticalization? For CRM, the foundation stage was the integration of sales, service and marketing processes. As that foundation has been established, now the opportunity is to make that more industry-specific. A great example is what's happening in the public sector, where CRM is the hot topic.

[Verticalization] is a natural extension. It's the next natural step in the functionality that companies are looking for. And from the software vendors' perspective, they need to sell more software, and what better way than to be able to talk very specifically about particular processes and industries.

Is there any downside to this specialization? The downside is if you miss the big picture. Very rarely is IT a competitive differentiator. It is an enabler of your [business] strategy and it should follow or cascade from that strategy. CRM software may give you parity [with competitors] but don't lose sight of the fact that what's more important is to identify your competitive differentiators and then apply those with technology. The risk is that companies may see the vertical functionality as a panacea -- and technology is never, ever a panacea. It's just an enabling tool.

The book is titled CRM Unplugged. Why unplugged? A lot of times when people think CRM, they only think technology. By calling it unplugged, we're saying let's think about these bigger strategy issues; it's not just about technology.

Why are CRM projects more likely to fail than other types of IT projects? If you think about manufacturing or financial or ERP applications, they have very specific processes and activities, like a chart of accounts or purchase orders. These are proven processes with standards. With CRM, it's a little more ambiguous; it's a little looser in terms of the sales process and service and marketing. There aren't as many tried and proven rules.

So when companies get to a CRM implementation, they're pulled in three directions:

  • the technology itself and its inherent processes;
  • the business strategy (why they're doing CRM); and
  • their current processes.

In CRM implementations, different companies will be pulled different ways. One company may want to keep its current processes, and then gets into a very complex, drawn-out [custom] implementation project where they have to change the technology to fit their processes. That can lead to failures, as they try to do too much tailoring.

Some other companies may implement the technology out of the box, without looking at the [good] processes they have that are competitive differentiators. These companies run into user-adoption issues -- it's completely different from what users have done before.

Some companies focus only on the company strategy. You should definitely cascade from the strategy, but you can't totally ignore the technology or current processes.

The best organizations are the ones that can balance all three: strategy, technology and current processes. You should definitely use some of the built-in processes in the software, but you should also look at your processes and configure some that are relevant to your marketplace. And you should understand your business strategy.

The other reason for CRM failures is that you're dealing with sales, marketing and service folks. And they are by nature interesting people with strong personalities and egos. If you don't spend the time on training and engaging the user community and using their feedback, then you're going to run into adoption problems.

With salespeople, before you do any CRM, make sure you understand how they're compensated. Make sure that the first time they hear about CRM that you can show how it can help them sell more and make more money. A salesperson is like water; they go to the path of least resistance. They're going to find a way to their goal, and if it's using CRM and that's the path of least resistance, they will use it. If it's not, they'll avoid it like the plague.

Special Report

CRM Goes Vertical

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Copyright © 2004 IDG Communications, Inc.

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