Achieving successful outcomes when implementing customer relationship

management systems with change management strategies

May 30 2011 - Leanne Ng

Introduction

Customer relationship management (CRM) systems are currently used around the business world as a tool to help
companies effectively manage relationship with customers . Often integrated with the organisation's enterprise
system, a CRM system can provide a great competitive advantage as well as contribute exceptional economic value.
(Nguyen et al, 2007) CRM systems and all other enterprise related systems entice managers who have been looking for
an off-the-shelf solution to solve their organisation’s business and data integration problems. They promise seamless
integration of all information flowing through a company. (Davenport 1998). This has contributed to huge uptake and
increase market growth by CRM systems. Latest Gartner Research says "worldwide CRM market revenue totalled $9.15
billion in 2008, a 12.5 percent increase from 2007 revenue of $8.13 billion", despite recent financial market volatility.
(Gartner Group, 2008)

However, not many organisations who implement CRM have been successful enough to realise any benefits. "For
years, change programmes involving a big change to systems, involves additional risk. It is no surprise — the more the
change the greater the risk." (Foss et al, 2008) "Successful implementation of CRM strategy and programs can be
hampered due to a resistance to change at various levels of the organisation." (Bohling et al, 2006) This resistance to
change are people-related problems that prevent an organisation from achieving benefit realisation post go live.
Systems such as a CRM system, imposes its own customer focus logic on a company’s strategy and culture, which can
cause an enterprise wide business process changes, job redesign and often an associated reduction in head count for a
company that is not originally customer-centric. (Davenport, 1998; Foster et al, 2007). "Companies cannot develop and
operate appropriately customer-focussed CRM systems and processes without motivated and trained employees."
(Foss et al, 2008)

Since major critical success factors identified for successful CRM system implementation are people-related, if an
organisation does not go through the tremendous challenge of persuading its employees to embrace – or at least not
to fight – the prospect of major change, the implementation project success will be impeded. (Hammer et al, 2001).
Therefore an effective implementation of a CRM systems for an organisation must have employees adapt to the
change positivity as a result of change management, which has been identified as one of the important critical success
factors for a successful implementation (Aladwani 2001; Bohling et al, 2006; Shang et al; Hammer et al, 2001; Payne et
al, 2006; Foster et al 2007).

Customer relationship management definition

"CRM is the core business strategy that integrated internal processes and functions, and external networks, to create
and deliver value to targeted customer at a profit, It is grounded on high-quality consumer data and enabled by IT"
(Burtle, 2004)

CRM acronym can mean many things to different people such as Customer Relationship Management or Customer
Relationship Marketing."Whatever it is called, CRM is clearly a business practice focused on customers." There is no
concrete definition on what constitute CRM. From a marketing point of view, CRM is seen as a better way to run
campaigns. But compared to IT point of view, it is seen as a system implementation consisting a database, data mining
capabilities, and a suite of front end application covering marketing, sales and customer services operating across all
channels and touch-points. (Burtle, 2004)

CRM system, e-commerce and data warehousing are usually technologies that evolve from overall enterprise systems
which impound a deep knowledge of business practices accumulated from vendor implementation in organisations
(Shang et al, 2000). These systems are integrated, enterprise-wide programs that provides support for core
organisational activities such as manufacturing and logistics, finance and accounting, sales and marketing, and human
resources (King et al. 2005; Aladwani, 2001).

According to Burtle, 2004, there are three levels of CRM:

• Strategic - "top down perspective, views CRM as core customer-centric business strategy that aims at winning
and keeping profitable customers"
 • Operational - "focuses on major automation project such as services automation, sales force automation or
marketing automation."
• Analytical - "bottom-up perspective, focuses on intelligent mining of customer data for tactical purposes"
Strategic level approach in implementing CRM ideals and systems is important as it drives a culture "dedicating to
winning and keeping customers by creating and delivering value better than competitors." Culture is reflect in
management leadership, design of formal CRM systems and resources allocated to best enhance customer value.
(Burtle, 2004)

CRM implementation projects are often the largest investment in an information system project in the history of the
company and in many cases the largest single investment in any corporate wide project (Sumner, 2000). "CRM project
can take between three and five years to implement fully and typical investment of a Global 3500 company in CRM
technology (software and services) is estimated at US$15 million to US$30 million annually." (Burtle, 2004) This is not
because of the cost of the technology, but the ongoing people costs." (Hammer et al, 2001)

Benefits from implementing an enterprise system

Since CRM packaged software benefits is similar in many respects to benefits from enterprise systems such as a
enterprise resource planning (ERP) system, benefits may apply to both systems. (Freeman & Seddon 2005) Shang et al
(2000) produced a consolidated framework of five benefit dimensions that organisations can achieve by using
enterprise systems. The five benefit dimensions are operational, managerial, strategic, IT infrastructure and
organisational benefits. Compared these benefits to CRM system benefits highlighted in Shanks et al, 2009, they are
very similar except they are more customer focused benefits:
CRM System Benefits Framework
Benefits for Operational Level of Management
1. Improved customer data management - provide "whole of customer view"
2. Improved process management - alignment of IT and business processes
3. Improved customer service - provide consistent and personalised customer service
4. Empowerment of staff - more autonomy in their tasks to shape procedures for specific customers.
5. Improved productivity - productivity gains translate into increased profit margins through cost savings.
6. Enables real-time responsiveness to trends - enhance relationships with immediate response and foster
continuous learning and improvement.
Benefits for Tactical Level of Management
1. Facilitates market segmentation - enables profiling of customers.
2. Facilitates key account management - better management of key customers.
3. Improved channel management - find the best, most effective channel.
4. Improved analysis, reporting and forecasting - produce more accurate, higher quality forecast.
Benefits for Strategic Level of Management
1. Improved customer satisfaction - Increase value provided to customers.
2. Improved business performance - Reduce customer attrition, increase retention, revenue and profitability.
3. Improved value-added partnerships - process integration across the entire organisation and even inter-
organisational processes.
4. Improved innovative use of CRM systems - innovation ideas from customer behaviour and preference
shared across the organisation, especially in research and development areas.

All these customer focused benefits are not realised by all companies, especially companies who are not customer
focused but instead either product, production or sales focused. For example, the Apple computer company, which is a
highly successful company is entirely product focus and do not do any customer or market research. (CNNMoney,
2008) "Many managers would argue that being customer-centric must be right for all companies. However, at different
stages of market or economic development, other orientation may have stronger appeal." (Burtle, 2004) This is
definitely the case for most start-up companies who must innovate in the product space, so they can be on a level-
playing field to larger companies, which can't be done on the customer, process and systems space due to resources
limitations. (Ernesto, 2005) Therefore CRM is not for all companies. Companies must be customer-centric, customer
led, customer focused and customer orientated to reap the benefits that come from a successful CRM system
implementation. (Burtle, 2004)
Barriers and failures during implementation of an enterprise system

Gartner Group's research estimates that failure rate for CRM system implementation is between 65 per cent and 80
percent. The failure to meet business deadlines and budgets; and the inability to achieve business benefits from the
implementation, often result in substantial financial loss (Parr et al, 1999). But why is this the case?

The term "work system" coined by Alter (1999) is sometimes used with the label "CRM systems" as CRM related
systems and processes, information, technologies, people, environment, strategies and infrastructure are elements
that are so "tightly meshed" that benefits of CRM system implementation cannot be realised unless the entire package
is complete and not just the technology itself. (Freeman & Seddon 2005) It is this misunderstanding where companies
assume that technology itself will solve all problems that prevents companies from realising their goals. "Technology
will typically account for only one-fifth to one-third of total CRM project cost." (Burtle, 2004) The main problems an
organisation faces are not poor technical methods but people related issues such as failures in communication and
ineffective leadership (Sumner, 2000; Hammer et al, 2001).

Recent surveys find that “four fifths of senior executives cite employee resistance to using customer relationship
management (CRM) software as the biggest hurdle they face when implementing the technology.” (Sims, 2007) In
other research, it has been estimated that as many as 75% of organisational change efforts involving technology failure
has been the result of employee’s negative reactions to changes in their work practices, changes in organisational
business processes and workers resistance to new technology (Markus, 2004).

Change is inevitable for CRM system implementation. "Poor planning, lack of clear objectives and not recognising the
need for business change are the key reasons for CRM failures." (Foss et al, 2008) “Getting people to accept the idea
that their work lives – their jobs – will undergo radical change is not won in a single battle” (Hammer et al, 2001).
Change for a customer centric company may be HR changes such as "people on the current payroll might need to be re
skilled or retrenched...new talent with CRM-useful skills, such as customer analytics, may need to be recruited." For
non-customer oriented companies changes may be severe such as complete organisation structure and culture
overhauled, perhaps shifting from a product-centric to customer-centric structure. (Burtle, 2004)

Most risk factors for CRM system implementation are people and business process related like (Sumner, 2000):
- Failure to redesign business processes to fit software
- Lack of senior management support and champion
- Insufficient training and re-skilling
- Insufficient training of end-users
- Inability to obtain dedicated managers to commit to project
- Ineffective communications

Many have identified top management support, strong project management/team, interdepartmental cooperation
and commitment to change as system implementation critical success factors (Aladwani, 2001; Bingi et al, 1999;
Hammer, 1999; Shang et al, 2000). These factors are all people related and are directly implicated by change
management (Foster et al 2007).

“Change Management” - a system implementation strategy

Foster, Hawking & Stein (2004) define change management as:

“the process of assisting the organisation in the smooth transition from one defined state to another, by managing
and coordinating changes to business processes and systems. Change management involves the effective
communication with stakeholders regarding the scope and impact of the expected change; formal processes for
assessing and monitoring the impact of the change on the stakeholders and their work processes, and identifying
and developing effective and appropriate techniques to assist stakeholders to cope and adapt to the new
technology”.

Change management strategy has been identified in many literature and case studies as an necessary action to
perform when implement CRM systems. "To implement CRM successfully, firms must combine physical resources (e.g.
computers and technological infrastructure), informational resources (e.g. customer databases, salespeople's call
records, customer service interactions) and organisational resources (e.g. customer-oriented culture, information-
sharing routines) to enhance relational resources (i.e. relationships with customers) so as to improve a firm's
competitive position." (Payne et al 2006) It is the combination of change management disciplines, careful project
planning and people commitment include internal employees and external suppliers (consultancies, systems
companies, business partners) that see CRM system change projects succeed and others fail. (Foss et al, 2008)

"CRM change management involves strategic organisational change and cultural change. Senior level understanding,
sponsorship, leadership and cross-functional integration are clearly critical in a complex CRM implementation." (Foss
et al, 2008) These change management traits are very similar to the change management Yang et al (2004) describes
as a critical success factor that must include training and education of stakeholders, communication management,
positively influencing organisational readiness for change and post go-live support.

Importance of change management strategy for successful CRM system implementation

“Companies that have the most success in selling change to their employees are those that have developed the
clearest message about the need for re-engineering.” (Hammer & Champy 2001)

Bohling et al, (2006) conducted a survey which found that one of the most problematic roadblocks to CRM
implementation while completing a CRM initiative and implementing CRM is the insufficient focus on change
management. If they had the chance to overcome the roadblock again, the top choice from survey respondents was to
focus on change management.

Change management has been identified in many critical success factor literatures as being a major factor to a success
of any re-engineering implementation including CRM systems as it has a direct impact to all people related issues that
occur during an implementation project (Foster et al, 2007; Foss et al, 2008). According to Foss et al (2008) and Al-
Mashari & Zairi (2000), successful implementation of CRM system depends on critical success factors, one being
change management, which is used to encourage and build a culture of customer-focus organisation wide. For
example, Aladwani (2001) notes that there are two fundamental sources of user resistance to innovations like an CRM
system is perceived risk and habit. To reduce employees’ resistance, top management of the organisation must analyse
these sources of resistance and must employ the appropriate strategies to counter them. This is where having a
change management strategy is crucial to a successful outcome of a CRM system implementation.

Example of change management strategies used in Continental Airline Case Study.

Note this example is all referenced from Anderson-Lehman et al (2004).

Continental used real-time technology and associated business processes to help support their "first to favourite"
strategy for real-time business intelligence. Making sure that the "business drive the technology" and not the other
way round, they implemented a combination of a data warehouse, multiple interfaces and tools to access warehouse
data, which included Teradata CRM. The marketing department was able to perform customer segmentation, target
marketing, loyalty/ retention management, customer acquisition, channel optimisation, and campaign management.
Their targeted CRM program resulted in $150 million in additional revenues in one year, while the rest of the airline
industry declined 5 percent.

The change management strategies they used to ensure the successful use of the systems included:
• Top management support and sponsorship through their data warehouse steering committee containing
senior-level business members, "most at the Director level and above."
• Hired skilled employees as well as educate and train existing employees so that the skill mix on both
warehouse and business sides is more even.
• Have the business drive commitment to the project by making business fund the data warehouse. "Any
proposal must have a business partner who identifies and stands behind the benefits."
• Close alignment between business and IT strategies. The approach to funding helps ensure that the data
warehouse supports the needs of the business.
• Ongoing communication and demonstrations. "People typically want new systems to give them exactly what
the old ones did." By developing 'cool' prototypes, the data warehousing staff were able to communicate
what could be possible and actively enrage other users to come up with fresh ideas.
• A careful selection of technologies and a clear vision and roadmap by co-existing strategic and tactical
decision support.
Conclusion
CRM systems can bring many benefits to an customer-centric company if implemented successfully. While news of the
high failure rates and barriers to successful implementation for CRM systems overshadow the benefits, it highlights
many opportunities for strategies to the implemented to increase benefit realisation from successful implementation.
Change management is one of these effective strategies that have seen many implementation project succeed such as
the Continental case. With more focus on change management, it will hopefully signal a decrease in failure rates in the
future for CRM system implementation.

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