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Notes from the Giga Advisor:
More CRM Without the Customer. . .and Without the Data Warehouse

  Column published in DM Review Magazine
July 2001 Issue
  By Lou Agosta

It is always fascinating when reality catches up with rhetoric whether in science fiction, politics or information technology. For the first time ever, we see evidence that information technology is catching up with customer relationship management (CRM) marketing rhetoric. In short, the critical path to the much hyped but rarely realized 360 degree view of the customer lies through:

  • A readiness assessment including assembling of the cross- functional team and evaluation of the total economic impact of the project;
  • Inventory of information, infrastructure, and implied architecture assets and design of consistent unified representations of customer, product, etc.; and
  • Implementation of a customer-centric data warehouse.

Without all of these, the result is often yet another CRM system that misses the customer.

Especially in the case of the multidivisional firm with multiple customer contact and delivery channels, data warehousing architecture provides a consistent design and representation of customers, products, services and channels - a critical path to success. This is because it is the nature of business requirements to be in flux. In contrast, the essential nature of architecture is to be something that stands fast. The challenge is to balance the conflicting requirements of data architecture flexibility and deliver business value. Just as a business intelligence (BI) application without the supporting framework of a data warehouse architecture would be meaningless, data warehouse architecture without a unifying decision support application is empty. Both are needed to succeed with high-impact BI initiatives. In addition, as the "profit sanctuary" for firms that still manufacture physical goods migrates from production to servicing big ticket items, the customer information collected in warranty data and service data becomes a critical component of a customer data warehouse.

As further evidence, a report from an industry analyst group (not Giga, in this case) being circulated by management consultant firm A.T. Kearney finds that: 75 percent of CRM initiatives fail due to lack of business vision and definitive business requirements; 63 percent of Global 2000 organizations tailor CRM initiatives to internal process, not the customer; roughly 40 percent of companies with CRM efforts underway report that the initiatives are not integrated across their organization; 60 percent claim some integration but no single, coordinated, enterprise-wide initiative; and companies are making significant investments in CRM, but only 10 percent have measured the return on investment (ROI).

Skepticism is warranted about the exact data points - especially with the implications that there are other reasons for project failure in addition to lack of business vision and requirements. The implication is that the failure rate would be even higher if all the usual suspects - staff turnover, lack of technical expertise, defective software products, or client or consultant mismanagement - were lined up. The numbers are clearly exaggerated so the reader does not miss the point. If a firm does not perform diligent planning (the report's suggestion is to hire Kearney for that process), then the enterprise initiative to build customer relations is at risk.

Nevertheless, while the numbers may be high, they align with anecdotal evidence Giga received in a conversation with a large investment firm with three separately funded and separately managed, simultaneously operational CRM (i.e., Siebel) projects. Such CRM initiatives are not coordinated or integrated. That implies further follow-up projects will be needed to merge the silos of CRM data that are being created. This is reminiscent of the heydays of enterprise resource planning (ERP) solutions which left numerous Giga clients with an instance of SAP ERP, PeopleSoft HR, Oracle Financials, unrelated operational silos and a data integration task that is still a work in progress. Likewise, it recalls the early days of data warehousing implementations that staggered like a drunken sailor between "big bang" projects that were quietly shelved and rapidly proliferating silos of data.

The irony is that CRM initiatives shortcut or skip the data integration step in an effort to deliver business value quickly at the user interface and must now face potential backlash as they try to retrofit data warehousing infrastructure. This ends up being a Faustian bargain. Like a deal with the devil or folk tale where the peasant gets three wishes, the prospect gets what he asks for - only to realize that it is not what he really wanted. Most data warehousing practitioners have no problem giving credit to the downstream application if data integration - what is really wanted - ends up being part of the bargain. Business value migrates in the direction of (and shows up at) the business intelligence application user interface. However, make no mistake about it, much of the business value that is perceived at the interface is the result of data integration performed upstream as a result of consistent unified representations of such data warehouse dimensions as customer, product, channel, market, promotion and other essential business dimensions. This data integration, in turn, is enabled by data warehousing.


For more information on related topics visit the following related portals...

Lou Agosta is the lead industry analyst at Forrester Research, Inc. in data warehousing, data quality and predictive analytics (data mining), and the author of The Essential Guide to Data Warehousing (Prentice Hall PTR, 2000). Please send comments or questions to lagosta@acm.org.



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