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 Bluefly.com Garden.com (gone) Pets.com (gone) Furniture.com (gone) Shoebuy.com $103 $245 $71 $200 $500 $15

Source: 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 In- Branch teller ATM Telephone PC Banking Internet Banking 0.01 Transaction Costs 1.20 0.40 0.30 0.20

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

Increased transaction flexibility

2 A: Scale Effect

Scale

Fig. 1 Scale and Scope Effects

New transactions

Increased transaction flexibility

1
Total effect

Scale

B: Total effect - increase transaction capabilities

Fig. 1 Scale and Scope Effects

Transaction complimentarities

1
Total effect

Scale

C: Transaction complimentarities

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, dont 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: Kinkos

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 customers future needs.

Generation III CRM: Ubiquitous organization.

Be the customers 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

Transaction Flow

Customer

Data Flow

Vendor

Access Mechanism

Emergency Services

Processing Mechanism

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.

Efficiency Layers

CEO/President Functional Areas (Finance/Planning)

Div 1

Div 2

Div 3

Div 4

Self-Service Design Real Time Internal Service Brokerage

Self-Service

Cross Functional Service Provision

Customer

Customer View CEO View Customers view is a mirror image of CEO view

Effectiveness Layers

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)

Alliance Partners

Div 1&2 Internal Integration

Div 3

Div 4

Shared Revenue Sources

Revenue Sources

Cross Functional Service Provision Customer

Sources of Revenue Growth

Shared Revenues Growth

Revenue Growth