Ubiquitous Organization:A New Paradigm for CRM

Presented by:

Rado Kotorov, Ph.D.M. F. Smith & Associated, Inc.

1201 Mt. Kemble Ave.

Morristown, NJ 07960

Tel.: 973-425-4912

Fax: 973-425-0800

E-mail: rkotorov@mfsmith.com

www.mfsmith.com

CRM - What is it?• The concept of customer relationship management is very

old. As soon as markets emerged, the customers became the patrons of the vendors.

• The goal of CRM has remained the same throughout the centuries:

ATTRACT AND RETAIN CUSTOMERS!

• 80/20 Rule:

20% OF THE CUSTOMERS CONTRIBUTE 80% OF THE REVENUES

• The CRM Value Formula:

RETENTION REPUTATIONATTRACTION

• You already have significant CRM experience and knowledge in your field, so, why are we here?

Cost to Snag a Single Sale

• Amazon.com $103

• Bluefly.com $245

• Garden.com (gone) $71

• Pets.com (gone) $200

• Furniture.com (gone) $500

• Shoebuy.com $15Source: Inc. Tech 2001, No. 1, E-Tailing by the Numbers

CRM (IT) - How IT Changed CRM?

• CRM (IT) Defined: CRM (IT) is the use of information and communication technology to expand the scope and scale of customer service.

• Examples:

8 hours of banking >>> 24 hours of banking

Checking Account >>> Add>>>> Brokerage

• Cost has remained the same! How?

What is the ROI of IT?

The ROI of IT is realized by reductions in TRANSACTION COSTS.

Transaction cost is the cost of conveying information to the customer, negotiating with the customer, making the contract, enforcing the contract.

Example:

Delivery Mechanism Transaction Costs

In- Branch teller 1.20

ATM 0.40

Telephone 0.30

PC Banking 0.20

Internet Banking 0.01

The Impact of IT

• The difference between In-branch teller and Internet banking is that by using Internet banking one can give the customer 120 times more transaction capabilities for the same price as before.

• By offering multiple channels the customer benefits either from the savings or from the increased transaction capabilities.

Some transactions produce saving only - Invoicing

Invoice delivery

On- line $1.65 Manual $5.00

Dispute resolution

E-mail $10.00 Phone $20.00

Fund Transfer

Electronic $1.90 Check $5.00

FedEx Shipping Charges $20,000 annually

Source: PC World, April 20. Manage Your Invoices Over the Internet, by Jennifer deJong

Fig. 1

Scale and Scope Effects

1

1

2

2

3

Increased transaction flexibility

Scale

A: Scale Effect

1

1

2

2

3

3

Increased transactionflexibility

Scale

New transactions

Fig. 1

Scale and Scope Effects

B: Total effect - increase transaction capabilities

Total effect

Fig. 1

Scale and Scope Effects

1

1

2

2

3

3

Transaction complimentarities

Scale

C: Transaction complimentarities

Total effect

4

5

Three Questions That Concerned Executives

Ponder• What are the emerging

technologies?

• How would the emerging technologies change customer behavior?

• How would the emerging technologies change our social organizations?

Emerging Technologies (ET)

• Until 1980 the emerging technologies were product focused:– The assembly line (Ford)– Industrial robots (Fanuc)

• The newly emerging technologies, however, are collaboration and customer focused:– KM– e-CRM and predictive-CRM

How Would ET Change the Corporation

• The emerging corporation is ubiquitous.• Many technologies have evolved to

become ubiquitous:– The electric motor operates hidden in

almost every appliance– The microchip obscurely controls and

monitors how our appliances perform• Organizations follow the same

evolutionary path.

The Profound Change In CRM is: Service Everywhere, Everything,

Every-way• Anywhere: Multiple channels - personal contact, web,

phone, web phone, etc (Merita Bank, Finland).

– beware of channel conflicts (Charles Schwab)

• Anytime:

• On Demand: Have a 360 view of the customer - needs, preferences, expectations. Manage information to anticipate and predict customer changes (AXA Inc.).

– beware of privacy issues, don’t be obtrusiveness

– beware of information overload and confusion (AT&T).

It Is Already Happening: Stock Brokerage

• A person can access a transaction processing engine/technology from a personal computer, PDA, phone, etc.

• Transactions can be completed from anywhere, at any time, and instantaneously.

• Service is offered and delivered continuously and unobtrusively on demand.

It Is Already Happening: Kinko’s

• Promotional materials can be uploaded on a server from anywhere and at anytime.

• Promotional materials can be accessed, modified, printed and delivered simultaneously to multiple locations.

• Service is offered and delivered continuously and unobtrusively on demand.

The Efficiency Paradox

• Corporations are designed for growth, and not for the customers.

• Horizontal and vertical segmentation increase productivity, lower prices, but also make the labyrinth bigger.

• Efficiency paradox: It takes less time produce a product than to service it (mass production), but this is not valid formula for products with layered information services.

Evolution of CRM

• Generation I CRM: 100 Focus on the customer - mostly contact data.– Customer recognition and low level service

personalization.

• Generation II CRM: 360 Degrees view of the customer -full descriptive profile.– Learn more about the customer and develop

expectations of the customer’s future needs.

• Generation III CRM: Ubiquitous organization. – Be the customer’s genie.

Core CRM Concept: 100% Focus on the Customer

Core CRM Concept: 360 Degree View of the Customer

Core CRM Concept: Ubiquitous Organization

Organizational Changes

• Generation I and II do not require organizational changes:– Add information technology– Add analytics and predictive software

• Generation III cannot be achieved without organizational and technological transformation.

External Functional Overview

Customer DataFlow

EmergencyServices

Vendor

TransactionFlow

AccessMechanism

ProcessingMechanism

CRM Organizational Design Benchmarks

• The customer-end architecture is a mirror view of the CEO-end architecture.

• A cross-functional process service layer is added, analogous to the functional layer underneath the CEO, with the purpose to:– Design self-service processes.– Broker in real-time services not

handled by a self-service processes.

CEO/President

Functional Areas (Finance/Planning)

Div 3Div 2Div 1 Div 4Eff

icie

ncy

Laye

rs

Cross Functional Service Provision

Self-ServiceReal Time Internal Service Brokerage

Self-Service Design

CustomerEff

ectiv

enes

s La

yers

CE

O V

iew

Cus

tom

er V

iew

Cus

tom

ers

view

is a

mirr

or im

age

of C

EO

vie

w

Business Drivers

• The more ubiquitous the organization, the more desirable its services become.

• The more customers demand, the more diverse needs they express.

• The more diverse demands, the more other companies seek alliances and revenue sharing with the ubiquitous organization.

CEO/President

Functional Areas (Finance/Planning)

Div 3Div 1&2Internal

IntegrationDiv 4

Cross Functional Service Provision

Customer

PartnersAlliance

Revenue SourcesShared Revenue Sources

Sources of Revenue Growth

Revenue Growth

Sha

red

Rev

enue

s G

row

th