Three big reasons CRM initiatives fail

Three big reasons CRM initiatives fail

Summary: CRM failure rates have remained high during the last ten years, indicating that many organizations don't receive full benefit from their CRM initiatives. Let's examine important reasons for this unfortunate situation.

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CRM failure rates have remained high during the last ten years, indicating that many organizations don't receive full benefit from their CRM initiatives. Let's examine important reasons for this unfortunate situation.

Although relatively few projects become complete write-offs, partial failure is common. Most often, a project delivers some expected benefit, but still leaves users unsatisfied and business sponsors wondering what went wrong.

This list describes three major pitfalls that plague many CRM initiatives. While not a comprehensive inventory of potential problems, many projects succumb to these big causes of failure.

Failure 1: Installing technology without a business strategy.

Many organizations fall into the trap of deploying tools and technology without creating a proper CRM-related business strategy.

For most organizations, customer relationships involve a range of interactions that together achieve (hopefully) positive results. Creating and executing a business strategy is difficult because CRM initiatives typically involve numerous components and moving parts.

A Gartner research document describes the importance of strategy:

A unified CRM strategy is absolutely critical to CRM success, but developing and implementing such a strategy is a complex, difficult and intensely political process.

Baseline magazine discusses the wide-ranging impact a full CRM strategy can have across an organization and its customer ecosystem:

[A] root cause of CRM failure is looking at the projects as software deployments when, in order to take full advantage of the systems’ capabilities, a substantial reorganization must be performed on virtually every operation touching customers.

A somewhat cryptic comment from Marketing Management magazine makes a similar point:

CRM mandates a synergistic combination of inter-departmentally construed strategies, programs, and processes. It is the weakest link in this combination that will determine the ultimate success or failure of CRM.

In other words, successful CRM initiatives focus on business objectives and use technology as a support to help reach those goals.

Think about CRM as a business strategy to help you organize plans and activities around better serving customers; although technology can help, it's not the goal. Forget this lesson at your peril.

Failure 2: Paying insufficient attention to user needs and benefits.

Engaging users is critical to the success of any enterprise software deployment, but particularly so in the case of CRM, where users can sometimes sidestep the technology and still accomplish their job function.

A research note from AMR Research explains why this aspect of CRM is different from other enterprise software categories:

In applications such as ERP, supply chain, or financial management applications, the users have much less flexibility or choice in whether or not to adopt an enterprise application standard. And when was the last time you heard someone question why financials were implemented?

A quick search reveals that many observers believe poor user adoption is a key driver of failed CRM projects. In a SearchCRM interview, SugarCRM's former CEO, John Roberts, links adoption to end-user perception of value (emphasis added):

In a lot of cases, companies deploy CRM, and there's a lot of euphoria over it for the first couple of months. Then, people stop using it. They look at it as 'Big Brother' watching them. CRM is sold as a tool to make an organization more effective and efficient; but the end user doesn't see CRM as making them more efficient and effective.

In my view, poor user adoption is not the direct cause of CRM project failure. Rather, it's a symptom the organization has not anticipated obstacles that may interfere with users embracing the new system.

Adoption may lag for many reasons, including:

  • Software that is complicated or difficult to use
  • Sales people that don't see adequate value in the new system
  • Poor communication of benefits to users

Get users to adopt a new CRM system by focusing on the WIFM (What's In It For Me) factor. I asked independent analyst, Erin Kinikin, for her thoughts on engaging users:

The sales person is quarterback for the customer team. Give the sales people good reasons to login and use the system. If the sales person feels the system saves time, makes money, or helps 'keep score', he or she will be much more likely to use the system -- and enter customer data.

One banker involved with CRM efforts told me:

Frontline users, particularly the most effective “top-producers,” will adopt the system only on the basis of real or perceived value.

Engage users early and often during the system planning and implementation phases, so they understand what's in it for them. When users do not adopt a system as planned, seek their honest feedback on how to make it more usable, helpful, and valuable.

Failure 3: Using ambiguous (or non-existent) measures of project completion and success.

Successful CRM projects are rooted in a clear trajectory aimed at achieving specific goals and objectives. Projects without concrete goals and a plan to measure both progress and results are distinct candidates for failure.

During a phone conversation, longtime Gartner CRM analyst, Gareth Herschel, described this issue succinctly:

One of the most common reasons for CRM failure is starting a project without first establishing a clear definition of success.

To solve the problem, articulate specific goals and create a targeted measurement plan designed around your organization's business objectives. Paying attention to the right metrics can help ensure your project produces the results you seek.

I asked independent analyst, Erin Kinikin, to describe the importance of measurement:

If CRM is the ultimate destination, the measurement plan is what tells you where you are now and points to where to go next. For example, it's not enough to decide to increase sales. Using a measurement plan, concrete metrics -- such as number and quality of sales leads, lead freshness, cycle time and win/loss rates by sales stage, and repurchase or upsell rates -- can help assess current strengths and weaknesses, measure CRM gains, and identify areas for further improvement. Doing CRM without metrics is like driving without a roadmap -- who knows where you'll end up?

Forrester CRM and customer service analyst, Natalie Petouhoff, is an expert on using metrics to align technology initiatives with business goals. She commented via email:

You get what you measure.

Although the analytical part of CRM offers the real gold, most companies have barely deployed "operational" CRM, which is a functional, relational database to keep track of customer information.

These organizations are just not prepared to handle all the issues related to legacy systems, reworked business processes, management expectations, organizational change management, and so on. They get bogged down trying to deploy operational CRM so the analytics never get implemented.

Without measuring, how can you know whether the business case used to sell the value proposition actually achieves results? This obvious point has somehow eluded most companies.

Organizations should measure changes in business results arising from major software deployments. Fiduciary responsibility demands senior management report this information to the Board of Directors.

Aside from IT, can any other part of an organization spend millions and not be held accountable for the results?

Use metrics to drive results that support your business goals. In the absence of metrics, expensive CRM initiatives can drift into failure without ever delivering meaningful benefit.

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During an irreverent phone conversation, CRM legend and fellow ZDNet blogger, Paul Greenberg, summarized the fundamental reason many projects don't perform as expected:

Companies expect to be the center of attention, but successful CRM depends on listening and understanding the customer. Sadly, most companies are pretty stupid about this stuff.

My take. CRM success arises from listening to customers, considering the needs of end users, and not substituting technology deployments for well-considered business goals.

[Asuret colleague, Lisbeth Shaw, helped research this post. Photo from iStockphoto.]

Topics: Software, Enterprise Software

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6 comments
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  • You Can Summarize It Like This...

    Michael,

    Well researched post. However, there is one thing that you allude too in your three points (and Paul mentions between the lines) but you are missing in your list.

    It is the only reason CRM fails, actually, which produces all those problems you mention in your post.

    CRM fails anywhere because it is not the right solution for the organization implementing it.

    Call it failure to fit in the culture, not measurement systems in place, or choosing technology over strategy - the truth is that the CRM vendors will push, and organizations will choose, based on a total lack of understanding of the three basics for implementing any large scale system: people, processes, and technology.

    And this lack of knowledge makes companies choose solutions that don't fit their needs (sure, they worked for Mark down the street, and Sally across town -- but they don't have your organization now, do they?)

    Just thought I'd add my 1.4 drachmas to the conversation.
    Esteban.Kolsky
    • Absolutely!

      Thanks so much for jumping in on this point. They say that the most obvious points are the ones most easily missed.

      You are absolutely right and poor fit should certainly be right at the top of the list.
      mkrigsman@...
  • RE: Three big reasons CRM initiatives fail

    Agreed! I would also add that lack of a defined cusotmer process and not understanding the culture/capability of the company can certainly hamper results.

    Thanks for the post.

    http://www.cegpartners.com/blog
    cegpartners
  • RE: Three big reasons CRM initiatives fail

    Michael,

    Great summaries and research on this and your previous post titled "CRM Failure Rates: 2001-2009".

    I recently wrote <a href="http://freecrmstrategies.wordpress.com/2009/06/29/the-challenge-with-crm-system-initiatives/">The Challenge with CRM Initiatives</a> which touch on many of the same topics:

    1. Defining and Measuring Success
    2. Setting Strategy
    3. Defining organizational and procedural changes required to execute the defined business strategy
    4. Maximizing value to ALL STAKEHOLDERS of the new system

    At the end of the day, the challenge with a CRM initiative is that there are so many expectations at so many levels, both internal and external. Success is certainly attainable, but requires the complex organizational alignment across management levels and functional disciplines.

    It's tough - but possible!

    Sincere regards,
    Brian
    bvellmure@...
  • RE: Three big reasons CRM initiatives fail

    Hi, you have very well identified and described the three reasons for failure of CRM initiatives. In fact for the first two points, I have published similar blogs which you might want to go through:

    http://www.infosysblogs.com/customer-relationship-management/2009/08/factors_driving_selection_of_t.html#more

    http://www.infosysblogs.com/customer-relationship-management/2009/07/people_change_management_a_pre.html#more
    suhaskanade
  • Well described...

    I think I'm in agreement with you. I think the problem isn't so much with a failure in technology. Instead it's a failure in understanding the business problem being solved and executing the strategy to solve the problem. As you say the hardest thing is to get people to use it when their situation wasn't even considered.

    Thanks for the Article

    James
    Ekardris