Handbook of CRM: Achieving Excellence in Customer Management
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The first part of the CRM strategy development process is to review the organization's business strategy. A detailed understanding of the business strategy is essential if an appropriate customer strategy is to be implemented. We should emphasize from the outset that CRM is not about developing a business strategy. Rather it is about fully understanding the business strategy in order to determine how the appropriate customer strategy should be developed and how it should evolve over time. CRM should not seek responsibility for business strategy development. However, it should intervene and ensure top management's attention is directed at business strategy where a thorough review of it clearly shows that it is wrongly directed or it is not taking account of changing competitive landscape. This is because it is crucial for the CRM activities to be aligned with and supportive of an appropriate business strategy.
We do not attempt a fully comprehensive coverage of all aspects of business strategy here. Rather we examine the key issues that need to be considered and some frameworks that can be used to make an assessment of the organization's business strategy in order that the CRM strategy is appropriately focused.
The role of business strategy
Business strategy is a top management responsibility that involves identifying the future direction of the enterprise as well as managing the creative interaction of the functional disciplines of operations, marketing, finance and human resource management. It is both a process and a way of thinking which leads to the development of a set of strategies that assist the business in achieving its corporate objectives.
Virtually all companies have a business strategy; however, this may be implicit or explicit. While some companies are successful with only an implicit strategy guiding the chief executive and the management team, it is our experience that companies developing an explicit strategy through a planned approach have a greater chance of long-term success. Almost all large companies who have introduced CRM will have developed an explicit strategy. However, our newspapers and business journals are a constant reminder that such strategies are often not well-formulated or well-implemented, or both and do not automatically result in success.
Corporate success can be the result of an implicit strategy being evolved based on creative entrepreneurial insights on the part of a company; or it may be the result of opportunistic effectiveness. That is, effective intuitive responses to short-term opportunities in the marketplace. A further factor that can influence corporate success is luck, which often plays an important role in success. However, these factors cannot be relied upon to produce long-term results. While they may result in initial success for a company, a further factor, developing a formal business strategy, provides an opportunity to influence sustained success over the longer term. Companies wishing to adopt such an approach need clearly to define their business vision and formulate a business strategy that takes full account of the competitive characteristics within the areas in which they have chosen to operate.
The process of business strategy formulation should commence with a review or articulation of a company's vision. The business vision should explicitly reflect the basic beliefs, values and aspirations of the organization. It should be noted, however, that many companies' statements of their vision display a great deal of similarity and read like public relations promotions rather than reflect the commitment to values that they are intended to be. A business vision should be an enduring statement of purpose that distinguishes the organization from its competitors and it should act as an important device for coordinating activity in an organization. A company's business vision should reflect the shared value systems which are held within the organization. It can provide a framework to enable the diverse staff of an organization to work together in a coordinated manner towards the achievement of the overall objectives and philosophy of the enterprise. Unfortunately, many companies' vision statements do not conform to these requirements.
Vision statements need not be long and platitudinous. Tom Watson, the founder of IBM, articulated his company's philosophy in the phrase 'IBM means service'. The business vision described by Watson was simple: not just to be a good service company, but to be the best service company. Tom Watson argued the vision of the organization had a great deal more to do with its performance on this dimension than did technological or economic resources, organizational structure, innovation or timing. Over most of the company's history it has maintained this strong customer service focus.
The most recent and authoritative work on business vision and identifying and communicating values is that undertaken by Hugh Davidson, a consultant and visiting professor at the Cranfield School of Management. His research was prompted by the fact that most of the written material on vision and values discusses how important they are and provides guidance on how to design statements, but there is little published about how to make vision and values work in practice. He undertook a two-year research study on how to make vision and values really work in organizations. His research involved interviewing top management (chairmen and chief executives) in 125 well-run companies and non-profit organizations in the USA and UK – companies which included BP, FedEx, DuPont, Tesco, NestlÉ, Johnson & Johnson and IBM, as well as many non-profit organizations.
Organizations use a variety of terms to describe their business vision. These include mission statements or 'missions', business definition, statement of business philosophy, belief statement, credo, vision statement, statement of purpose and so on. Davidson found the term 'mission', which has been widely used over the last 25 years, has become less popular in recent years as managers feel the use of the term has been abused. He concluded that it did not matter which words were used to describe the business vision; what was important were three fundamental questions. The questions and terms he uses to describe them are:
- What are we here for? – Purpose
- What is our long-term destination? – Vision
- What beliefs and behaviours will guide us on the journey? – Values.
A good example of a company putting this into practice is Goldman Sachs. They are a market leader in their sector and one the best companies in the investment-banking industry. The box below shows how they define their purpose, vision and values.
But just having a statement of vision and values is not enough. Companies such as Goldman Sachs live these on a day-to-day basis. Goldman Sachs are no longer a partnership but they still maintain a partnership ethos. Their vision is to be the world's premier investment bank in every sector in which they operate. As Davidson points out, values are where they differ radically from most of the other investment banks. They put their client before profit. Everybody at Goldman Sachs understands the importance of always putting their client first. They also place teamwork very high on their agenda.
The business vision and its associated values form an important element of a company's strategy. Put simply, without a clear, concise and well-communicated vision the company is unlikely to be highly successful in achieving its goals. Organizations are now realizing that developing a vision and a set of values associated with it may be difficult but is a very worthwhile activity. A business vision is typically developed as part of an enterprise-wide consultative process, which involves input from different functional areas and management levels.
Competitive advantage is difficult to create and sustain. As the service economy continues to grow, few purely product-based businesses now exist. Where they do, their products can be reverse engineered and imitated. Companies providing services have no patent protection and are open to ever greater and faster copying of their service range. Those businesses that are highly successful tend to have a strong culture and compete on the basis of their people and process skills. A strong and appropriate vision and values enable companies to develop a distinctive culture and a focus for their employees. This can result in a 'people advantage' that is difficult, if not impossible, to imitate. Davidson concluded that a strong vision and values can create differentiation and build motivation, trust and customer focus among employees.
Experience has shown that vision and values are often developed the wrong way. Inventing slogans like: 'the customer is king' or 'let's be customer-focused' are exactly the wrong way to develop vision and values. You have got to start off by identifying what are the key future factors for success in your marketplace and then build the values around achieving those key factors for success. In that way if you make your values work, they build competitive advantage. Otherwise they are quite irrelevant.3
To assist in the development of business vision and values Davidson identified seven best practices for making vision and values work (Figure 2.1). He applied these best practices to the 125 organizations he studied, defining 'excellence' as the achievement of all seven of them. Only 6 per cent of the organizations, including Johnson & Johnson and the Mayo Clinic, attained an excellence rating. The average company only addressed four of the seven practices. Davidson concluded that 'the seven best practices are synergistic and work together: Four out of seven is not 55 per cent, it's about 33 per cent in terms of performance'. His research findings show most organizations still had a long way to go in making their vision and values deliver demonstrable returns.
Figure 2.2 gives some examples of strong visions, which Davidson identifies as meeting his seven best practice criteria. Sun Microsystems' vision is a particularly good example of how a strong vision can act as a compass for employees. As Robert Youngjohns, the company's Vice President, explains: 'Sun Microsystems' vision of open systems and computers as easy to operate as a mobile phone was developed in 1987. Our consistently followed vision has been the key to our success in the past 10 years. Without it, we would have become diverted and lost direction, like some of our competitors'.
Developing a strong business vision represents an important first stage in establishing a successful business strategy. We will revisit this subject when CRM change management is discussed in the final chapter.