Story about Mr. S and the failed CRM project

Small insight in my latest article published in Mreza magazine (www.bug.hr/mreza). This is a story inspired by a true event and used as an descriptive introduction to the topic of CRM implementation. The complete article is available in Croatian in the April 2010 issue of Mreza magazine (www.bug.hr/mreza).

The story below is inspired by a true business case. I used it as introduction to the topic of CRM implementation in the latest issue (April 2010) of Mreza magazine (www.bug.hr/mreza). Herein translated to English.

At the end of winter 2003, Mr. S, member of the board of a large telecom operator, walked nervously from end to end of his office on the top of a glossy office building. In front of him there where two little men sitting on a leather sofa. One of them, an external consultant, was staring at the floor. The second one, the project manager from the company, was speaking with trembling voice, trying to explain the circumstances that led to the collapse of one of the largest CRM implementations in the world that year. The situation was more difficult because the bad news came too late. Mr. S has reserved, only a week ago, part of a fancy Austrian ski resort to celebrate success with project teams of a “big bang” implementation of almost all modules of the world’s leading CRM application.

Mr. S believed that the implementation of CRM applications will link his company by steady, predefined, user-oriented processes that will remove communication barriers with customers, reduce human mistakes and, ultimately, fend off new operators who where sharpening their balance sheets for the market battle against what they considered a slow telecommunication giant.

This drama has not occurred somewhere above Manhattan Avenues, but in a small Eastern European country.

How and why did tens of millions of Euros invested in the CRM project of Mr. S leak away like sand, into the pockets of consultants and software vendors? This question is asked by hundreds of companies that have decided to implement CRM and take a step forward to customer-oriented business.

The answer is individual for each of them. However, the legendary failures of CRM projects, such as that of Mr. S, or many others which have ended with much less glamour and lost resources, can be explained by few main reasons, summarized in an unique and fundamental mistake of introducing CRM. It stems from the complexity of any CRM initiative. It appears as its starting point, or simply impose itself through perception where “one doesn’t see the forest from the trees”, meaning that problems around complex IT solution make forget why the initiative had been launched at all, and which where the original indicators of its success.

Detailed elaboration of CRM processes, documented in a book of nearly 600 pages served as basis to the mastodon project of Mr. S. Despite millions of Euros invested in the project and its preparation, it was doomed to failure from its first day.

In summary, there where two main reasons. The first was the aforementioned implementation of CRM applications and overestimation of its power, with neglecting the fact that the business is run by people rather than processes drawn by a group of experienced consultants. But the project did not even survive enough to come into the hands of internal users to get the chance to crumble during the day to day operations. It failed already on the basic understanding of the role of IT within customer-centered processes and the respect for the compromise between the cost of the implementation and its return.

Unpretentiousness is the name of the game in the company of successful CRM implementations. Some processes, among hundreds designed to be embedded in the CRM application, were simply too pretentious. They demanded so many adjustments and use of artificial intelligence that those couldn’t succeed. Especially when you take into consideration that computer decision making involves the appropriate information, the same one that is achieved only after years of using CRM systems.

7 wisdoms for a successful CRM implementation

In April 2010 issue of Mreža (www.bug.hr/mreza), the Croatian magazine for IT professionals, my new article on CRM will be published. Actually there are two articles, one about CRM implementation and the other about related sourcing options and the available technology choices. I post here the English preview of the implementation part – a 7 points resume of the proposed implementation advices – the 7 wisdoms for a successful CRM implementation:

A preview of my article from April 2010 issue of magazine Mreža (Network)

  1. Do not “implement CRM“, rather solve specific business needs (sometimes you will want to have it so badly just because others would claim to have it too)
  2. Understand the culture and motivations of individuals and departments and incorporate it into the design of your CRM (even the cleaning woman may have something against your concept of CRM).
  3. Focus on small victories on the road to your great goal (otherwise only the goal would remain, an empty project budget, and travelers tired of the journey).
  4. Describe the desired business outcome to the technology providers, rather than the solution it self (describing a solution is their job anyway).
  5. Manage change at all levels during and after implementation (without a goal, a reason, and a role, even the most persistent ones shall give up soon)
  6. Optimize the user experience of your CRM application (a bad user interface is a grain of sand that can ruin whole systems).
  7. Establish a process of managing your data (data does not know how to leave a client, enter the CRM system, mark it self, link within context and turn it self into information).

©Alen Gojceta

“Tasting” the McCafe’ business model

McDonalds announcement to introduce McCafe’ line of business brought many controversies during past year or so. One of the comments from a journalist was about hard-to-immagine truck diver who jumped in McDonalds for a fast and cheap hamburger lunch, asking a fancy cup of latte macchiato. Is this a problem? I went to the Zagreb McCafe and “had a taste” in person of the newly introduced McDonalds business model. Read about it in the furhter text and let me know what do you think.

A coffee shop in the hamburger kingdom

A year ago I read a lot about controversies about McDonalds’ decision to introduce coffee shops within their existing restaurants. At the time one of the many skeptics wrote that he couldn’t imagine a truck driver entering a McDonalds restaurant, taking a cheap lunch and ordering a fancy cup of coffee. There where many opinions that McDonald’s intrusion into Starbuck’s playground will turn into failure. There where many believing the opposite though.

Mc’Donalds decided for two approaches to introducing coffee line in its existing business:

1. In US the coffee line of business is integrated into the existing front counters

2. Separate counter and cafe’ – style furnishing within existing restaurants, started in Australia in 1993. This model started to extend to Europe in 2009.

In Zagreb the first McCafe’ was introduced in autumn 2009. I was really curious about what will be the success. These days I had the opportunity to “taste” the business model, through customer goggles. Here is my experience and annotations.

Me and my laptop walked through the McCafe’ door due to a reason different than usual choice of a cafe’. After the temporary suspension of the anti-smoking law in Croatia, McCafe’ remained one of the very rare places in Zagreb where one can enjoy a coffee without having to take the role of a secondary smoker.

Nice cakes, but where is the WiFi?

From customer perspective it was a decent experience (as I didn’t poor the coffee on my keyboard this time, my laptop will not be asked about his opinion :-)). The McCafe’ (at Zagreb at least) is smoothly integrated into the standard fast food area. As my idea was “work-and-coffee“, too many children running around after 3 PM where disturbing eventual phone calls. As some customers claimed to the Business Week’s reporter (http://www.businessweek.com/magazine/content/09_40/b4149070703260.htm?chan=globalbiz_europe+index+page_management+%2Bamp%3B+learning) in her article about McCafe’ penetration in Europe, the smell of French frites and hamburgers does spoil the coffee shop atmosphere. Indeed. During my stay at McCafe’ I really missed a WiFi link and a coffee sized less than a mid cup. What about a “small macchiato”?

When trying to have a look from the back door, my estimation is that the business model is placed on healthy basis. Here is why.

My only concern is that the McCafe’ bar seems often too empty, but the rest of business case seems to be built around productivity and up sell.

First, it is pretty hard to resist some of excellent, yet pretty expensive cakes, when you jump in for a cup of coffee.

Additional argument on up selling that keeps the business running, are many parents that approach the McCafe’ counter after having ordered food for their children at the fast food counters.

Productivity + up-sell is the name of the game

From productivity perspective, McCafe’ shares existing resources (such as cleaning personnel) with the rest of the restaurant and employs fewer personnel than an average coffee shop. Actually only one lady is taking care of the whole McCafe’ experience, including coffee making, cakes decorations, billing and the inevitable “enjoy” phrase.

Comparing with a traditional coffee shop that engages a “running waiter”, in McCafe’ the productivity is additionally enhanced by the fact that customers serve them selves at the bar and clean their desks afterwards by bringing their trays back to the McCafe’ counter. It is worth mentioning that the price of a small cup of coffee is among the highest in Zagreb area (10Kn = 1,3€, cca 2$). More expensive coffee can be found at a few very fancy places and 4+ star hotels.

Cakes to go

In terms of cross selling and reusing existing resources, McCafe’ has thought about the possibility to sell cakes “to go”, extending their presence to home parties and celebrations. McDonald’s has extended its business model to coffee line of business, without actually having to innovate, or spend too much. They got all of it already – food “to go”, restaurant management, location, experience management, standards,…

The Business Week’s article cited above, brought an estimation of Jeffrey Young, managing director of London management consultancy Allegra Strategies that the investment for a new stand alone Starbucks in Europe is at least tripple the amount of that for a McCafe’ within the existing McDonald’s facitilites. I’d add that it is the same ratio, if not higher, when talking about the daily business expences (personnel, energy and the like).

All in all it seems that there was no place for skeptics when talking about McDonalds introduction of McCafe’. The new line of business is all about up sell and reusing the existing resources. This was a simple business idea, and simply hard to miss. And here is a simple thought for the end: If these are results of a marriage between hamburgers and cappuccinos, think about the consequences of the merge between mobile (T-Mobile) and land line (T-Com) telecom operators.