Hosted CRM

salesforce, NetSuite, RightNow

Holy moley. I've known for a couple of years that the hosted CRM segment was going to explode. This is part of a general trend towards outsourcing processes, but it's also an acknowledgement that the battle for the top is over: Big iron CRM deployments built from scratch just do not constitute a market that companies are willing to compete for. They want the big mid-market, and the mid-market doesn't want the nightmarish complexity and expense of custom-from-the-ground-up CRM solutions.

Ah, but there's the rub. The key to success nowadays is to create a DIFFERENTIATED multi-channel experience for and relationship with your customers. How are you going to do that without a custom-from-the-ground-up strategy? You can't. So, are the hosted CRM solutions for you? Only if they provide you the business process customizability that gives you strategic advantage.

Unless, of course, your goal is to do CRM "tactically". Fine. Pull in an analytics module, a call center module, and so on. Don't risk a lot of money. Don't force a big culture change on your company. For some companies, this can work for a while. For an even smaller number, these tactics can even swing some marketshare to you that won't leave you when your competitors finally wake up. Good for you.

But the downside of hosted CRM is that it is cheap and lower risk, which means anyone can do it, and that means any move you make can be quickly copied by your competitors.

Software always has this characteristic: Over time, it does the same stuff, better and cheaper. The scale attribute of hosted CRM has pushed costs down even faster.

The conclusion? You must choose a CRM strategy that gives you sustainable competitive advantage over a long enough time horizon that you get a better return than your competitors can.

That's a bigger chunk of work than just choosing your next hosted CRM vendor. And guess what? It'll be expensive, and probably require a culture shift at your organization.

Darn. No such thing as a free lunch.

And the same is true of CRM vendors. Luckily, a good number CRM companies are smart marketers and have aggressively differentiated themselves win sustainable marketshare. (Check out SearchCRM's good article on recent moves by RightNow and salesforce.com here). This actually lets you match your strategic needs with a specialized hosted CRM offering. The downside is that the same option is open to your competitors.

Saleforce.com, I believe, has made a good step in fixing this problem by making its basic offering extensible through what amounts to being an "on demand development environment," as SearchCRM aptly puts it. Others are competing on hosted business rules services (RightNow, a great company that gets it) and better dashboards for decision makers (NetSuite). Where will the CRM initiative win at your company: in IT, in the C-suite, or in an more integrated approach that spans all channels and many departments? The answer may help you pick a vendor.

Creation nets: Harvard Nails It

What McKinsey Missed. And risk.

As soon as I shoot a cannon across the bow of McKinsey because they left customers out of the creation net, I pick up the April issue of Harvard Business Review to find an article called Manage Customer-Centric Innovation -- Systematically by Larry Selden and Ian MacMillan.

They recommend a handful of steps to get customers involved. The "extend" part of their prespcription is a big challenge. You must extend both your capabilities and your segments. How do you do this without disrupting your business model and finances? There may be no way to do this, particularly if you are at a cross-roads with your company or with your sector. In fact, disruption is probably inevitable.

But you will want to manage that disruption. First, look at how others, beyond direct competitors, have succeeded in extending their capabilities and segments. Essentially, you're gathering business intelligence about your (direct and indirect) competitors' creation networks. How have other companies accessed and serviced your markets and do they define their markets differently?

Next, look at your partners and suppliers. What markets and capabilities work for them? Why?

One key insight is that an innovation strategy is risky, so you have to move the costs of those risks somewhere -- in your pricing or your financial structure, for example. You can also move some of those risks out to partners and suppliers, if they are eager to work with you.

Should you innovate? The answer lies in another question: Who is setting the pace for change in your sector? You? A competitor? Or customers?

Creation nets

I saw a great new article in McKinsey Quarterly (to which you must subscribe, hint, hint). It's called "Creation nets: Getting the most from open innovation" (Brown, John Seely, and John Hagel III, 2006 Number 2).

The idea is that you have to innovate to succeed (and this seems to be increasingly true as competition accelerates), and the best ideas may come from outside your company. CEOs generally agree that internal R&D is among the least successful ways to innovate, according to another McKinsey article I heard about in a recent Peppers & Rogers webinar. (I think the article is called Extreme Innovation. When I've got ten seconds to my name, I'll track down the reference for you.)

Brown and Hagel say:

"Although creation nets thrive in many different parts of today's global economy, they may not be fully visible to casual observers. Many Western executives, for example, go to original-design manufacturers (ODMs) such as Lite-On Technology and Compal Electronics, which are based in Taiwan but have expanding operations in mainland China, to source designs for a wide range of consumer electronics and high-tech products. From the perspective of these executives, they are dealing with a single outsourcing provider. Yet behind the scenes, the ODMs are mobilizing large creation nets to push the performance envelope of the products they design."

But oh, my gosh. Look at the big hole in the program: They've left out the customer in the creation net.

And to make this blunder even worse, it is the customer that actually defines innovation as a business term. New products and services that are not taken up in the market are not innovations.

So, if you leave out the customer during the R&D process, you're playing craps with your capital investments.

This is not to say that inventions of the past haven't, by chance, hit upon a latent (i.e., unknown) need of the market. But chance it was. Shall I mention craps again?

And to top it off, the authors were so close to getting it right, I'm amazed they left the customer out. The reason that creation networks actually create value is that they are constructed on the basic building blocks of a new kind of economy: one that is transitioning from an information economy (post-industrial, founded on information and knowledge sharing via computer technology) and a digital network economy (post-information, founded on the ability for all players to act on and improve knowledge and process outputs). Connectivity, information, motivation and co-evolution of knowledge are all parts of this network.

This is why customer experience management is critical to creating value for your company. The customer experience is an interaction (both you and the customer are players) -- it is not a "message broadcast" or "information delivery" marketing play. You must enable interactions so they can improve. That is, if customer experiences are what you want to manage and improve, then they must reveal actionable information to you (and probably to the customer). If you don’t manage customer experiences this way, you’re stuck in the information age at best – and perhaps in the industrial age at worst, where marketing and public relations were all extruded from the top.

A conscious customer strategy that brings customers and prospects into your innovation processes can really pay off for you. And, you basically have no choice in the matter if you want to be part of the new economy. You have to employ creation nets, and customers have to be part of them. You can't capture marketshare in a net filled with holes.

Global CRM

Global CRM

I'd like to share an announcement relevant to my friends and colleagues in the Washington DC area.

WEDNESDAY, MAY 24 - FOREIGN POLICY WORKSHOP

THE FUTURE OF US-ASIA RELATIONS - A U.S. Dept. of State Bureau of Intelligence & Research and Office of Civil Rights Workshop

Moderator: CORAZON SANDOVAL FOLEY
Bureau of Intelligence and Research Program Manager

Featuring BARRY WELLS - Office of Civil Rights, US Department of State
HENRIETTA FORE - Under Secretary of State for Management
VISHAKHA N. DESAI - President of the Asia Society
DR. VICTOR CHA - Director of Asian Affairs, White House National Security Council
HON. WILLIAM ITOH - Former Ambassador to Thailand
DR. FRANKLIN ODO - Director of the Smithsonian's Asian Pacific American Program

Location
WEDNESDAY, MAY 24, 2006
11:00 am - 1:00 pm
Dean Acheson Auditorium, U.S. Department of State
23rd St. NW Entrance
Washington, DC

Admission
FREE, but Advance Registration Required!
Please register by Friday, May 19. To register, email event@worldaffairsdc.org or call 202.293.1051 with the following details:

1. Full Name; 2. Birthdate; 3. Driver's License or Passport Number; 4. Citizenship; 5. Affiliation

The above information is required for security clearance purposes with the U.S. Department of State. Please have photo identification at entrance!

Global CRM

Global CRM

Customer experience management is hitting the government (and the beltway) big time.

In the last two days, I've talked to two important organizations which both spontaneously had begun looking into CEM. One derives most of its revenues (near $1billion USD) from the US Government. This company has to compete for these funds, and they realize the standard procurement process -- presumably designed to level the playing field to remove non-proposal influences -- is not the only game they have to master.

The other organization is a US Government agency. They have two big constituencies: fellow agencies, whom they assist; and global stakeholders working to harmonize regulations, laws and behaviors with international standards. It may appear that the payoff in CEM (and CRM) for this agency is not primarily measured in dollars, but in value created. And that's true. But dollars count here, too. The agencies served by the organization I'm talking about can advance their causes through other organizations (NGOs and for-profit consulting and development firms). So CEM in this case is one way to assure that this particular agency gets more wallet share from the agencies it serves. That lets them build their budget, attract better talent, keep them longer, and become more effective.

In both cases, though, CEM is being introduced to provide relative competitive advantage.

Still, CRM is the bigger player in all this. CEM matters, but just looking at the new Google Trends reports (go to http://www.google.com/trends) shows that CRM is a Google keyword far more often than CEM. (You can discover some other interesting data by checking out this cool new search engine feature. Go Google.)

That's it for now ... gotta get a proposal and a strategy out, and then I am at last going to get my haircut. Then I'm rewarding my lovely bride with a dinner out. Every day is Be Nice to the Bride Day, right?

Global CRM

Global CRM
I'm finalizing a couple of sessions on customer experience management today, which will help audiences in Singapore figure out the "CEM model fit" for their organization.

I've been thinking a lot about the organizational challenges to building a decent CEM program. Renée George from Kimpton Hotels carved out her own position to do it: Director of CRM and strategic marketing. She drives the big picture and the smallest details to make sure they're lined up. (See 1to1media.com for a great article on George's work with Kimpton.)

But a lot of organizations don't have the guts or vision to put someone in charge of strategy and tactics that spans units, functions and processes. Too bad.

I think one helpful approach is to develop a CRM and CEM communications strategy within an organization that allows stakeholders to learn how improving customer experiences can improve products, processes and resource allocations. This learning process is critical to adoption of any future system.

But adoption isn't the main goal of such a culture changing initiative: The key is to make explicit those tacit communications that interfere with or support creating great customer experiences. In short, the communications plan should be two-way: Educate your enterprise, and encourage conversation so you -- and others -- can identify how products, processes and resource allocations directly affect and can improve customer experiences.

This turns the responsibility for change onto each person participating in this two-way exchange, and puts the "what's at stake" argument in their lap.

Global CRM

Global CRM

I've been involved recently with developing curricular material both for CRM and CEM (Customer Experience Management) training. It's a fascinating exercise.

First, people like me (aka CONSULTANTS) have a bad rap: we offer superficial advice and we leave the scene before the real work gets done. We'll that's not always true, but generally the executives I deal with take a jaundiced view of consultants (not of me, of course!).

But to create curricular material requires that one focus on what is proven and what is really practiced. This means I've been devoting a lot of time determining the state of the art of marketing, operational and strategic thinking -- and behaviors -- coming out of global companies.

This is not a stretch for me, particularly, since I try my best to keep up with this stuff anyway.

But it does force me to ORGANIZE this information so it can be quickly understood and, ideally, adopted.

And this is where it's interesting.

Because, in training as in life, adopting what you learn is plain hard. I just finished a series of articles for CRM Today that featured my interview with EuroRSCG's strategy planner Jerome Guilbert. One of the points hidden in the interview is that his customer strategies only partly penetrate his client's operations and thinking. Here he is, one of the smartest guys in the customer strategy business, and big companies don't really "get" what he's telling them.

Even if they understand it, they're not ready to act on it.

And that's what happens with curricular material. How can you present the latest research and "best practices" and hope to get the audience to both understand it and act on it?

I've been using a lot of case studies lately. That's been terrific. I found them especially helpful in my seminars recently in Malaysia. But case studies are compelling stories -- with points that emerge in discussion -- and they can only go so far in helping someone actually convert the knowledge into action in his/her specific case.

It's tough.

But here's what I've concluded, after doing dozens of modules of this type: I'm training thinkers, not necessarily doers. The key first step in CRM -- and CEM -- is recognizing the value of customers. It's too glib to say they're "important". How do you measure their value? How do you create more? How do you describe customers' needs? How do you monitor them? All these "hows" must be preceded by this simple realization. Everything nowadays starts with customer insight.

If I can get that across, I've accomplished something.

Of course, the devil's in the details.

Which is where consultants come in, I guess. :)