These Are the Times of CRM Vindication and Validation – Part 1

Some previous TEC blog posts have discussed the benefits (but also the inevitable caveats) of white papers, including the all-too-common vendors’ self-serving marketing fluff and buzzword verbiage, and about their (un)intended audiences. As part of my daily routine of doing research on vendors and their strategies and offerings, I’ve read a ton of white papers in the last decade or so.

And yes, these have ranged from blatant and flamboyant bragging about a vendor’s capabilities (a la the “Every man thinks his own geese are swans” proverb) to some exceptional ones that were quite educational and established someone’s expertise in something. Other latter examples (in addition to my previous post on Arena Solutions’ white paper on the pitfalls of manufacturing outsourcing) would be the following two white papers:

1. “Customer Relationship Management: The Winning Strategy in a Challenging Economy,” authored by Microsoft Dynamics CRM, and
2. “Maximizing CRM Effectiveness During Lean Times,” authored by Oracle CRM

Why? Well, when I read them, many things therein rang true to me from my own research and findings (e.g., the ongoing success of Salesforce.com, Oracle CRM, NetSuite, Microsoft Dynamics CRM, RightNow, Sage CRM, SugarCRM, and SAP CRM as well as ongoing TEC’s end-users’ inquiries), even though I was cognizant of Microsoft and Oracle intentionally touting their “astute CRM features” in respective documents. The fact remains that in 2009 customer relationship management (CRM) became a recession-proof enterprise application category as organizations scrambled to retain and mine existing clients for new opportunities, while superior customer service remains a differentiator in these times when lower prices and higher quality are a given.

In an ever-increasing competitive environment, the window between product conception and innovation on one hand, and commoditization on the other hand, is getting ever smaller. This phenomenon increases the need to differentiate around customer service to distinguish any organization from its competition. And, as a matter of course, customer experience can transcend every touch-point on the company’s front line including its sales, marketing, and service teams. The customer-facing front line also includes the company’s programs, campaigns, and promotions in all these areas, as well as its Web-based service channels and storefronts.

Not the Time to Be a Shrinking Violet

In a growth economy, everything seems straightforward: businesses typically work hard to expand their customer base and spend aggressively to fire up the growth engine. But as soon as revenues begin to dwindle during challenging times, many companies respond by aggressively cutting staff and budgets, particularly those in the IT department.

The conventional wisdom is that in the face of an economic downturn, rationalization, consolidation, cost-cutting, hiring freezes, etc. become the name of the game. Everyone tends to spend less on IT and only invest in those technologies that enable the organization to meet its most basic operational requirements.

In other words, companies tend to cut the IT budget to the bare bones needed to support building and delivering their products and/or services. But while this knee-jerk response is understandable, is it necessarily the wisest one?

Unfortunately, when it comes to managing customer relationships, this behavior could be both a short- and long-term detriment to business success. In fact, an article in The McKinsey Quarterly from September 2008 entitled “Managing IT in a downturn: Beyond cost cutting” cites the risk of making wholesale reductions in IT spending:

“Simplistic cuts, applied across the board, may endanger critical business priorities from sales support to customer service.”

McKinsey has also found that investments in “technology-enabled business processes” deliver far more impact than reducing costs. While the natural reaction for many companies in challenging times is to become inwardly focused and concentrate on conserving working capital, history has shown that it is in these critical times that savvy organizations have a significant opportunity to outflank their competition.

“A downturn is a terrible thing to waste.” This quote in The Wall Street Journal (WSJ) article from mid-2008 came from one Home Depot supplier, and it reinforces the bold premise of investing for growth when times turn tough. In fact, a March 2008 study conducted by Bain & Company found that during the last recession more than a fifth of the companies in the bottom quartile jumped to the top quartile in their industry and more than a fifth of “leadership companies” fell to the bottom quartile.